Petition for Writ of Certiorari — Healthpartners of Southern Arizona v. Atkins

Supreme Court brief1997

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FILED

\\) 96205 1 JUN 25 1997,

No.

In The

Supreme Court of the Anited States

October Term, 1996

HEALTHPARTNERS OF SOUTHERN ARIZONA d/b/a

PARTNERS HEALTH PLAN OF ARIZONA, INC.,

Petitioner,

VS.

JOY ATKINS,

Respondent.

Petition for Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

D. THOMPSON SLUTES DAVID E. MANOOGIAN

SLUTES, SAKRISON, GRANT, Counsel of Record

HILL & RUBIN JEAN M. JONES

33 North Stone JOANNA JESPERSON

Suite 1100 EPSTEIN, BECKER

Tucson, Arizona 85701 & GREEN, P.C.

(520) 624-6691 1227 25th Street, N.W.

Suite 700

Washington, DC 20037-1156

(202) 861-0900

Attorneys for Petitioner

utz

a (800) 3 APPEAL « (800) 5 APPEAL « (800) BRIEF 21 M agelat

QUESTIONS PRESENTED

1. In the relationship between ERISA removal and COBRA

conversion, is an enrollee of a converted COBRA plan who

terminates her converted plan prior to filing suit still a

“participant” of an ERISA plan for purposes of removal, in light

of this Court’s decision in Firestone Tire & Rubber Co. v. Bruch,

489 U.S. 101 (1989)?

2. Is appellate review of an order of remand appropriate

when collateral findings of substantive issues of law and of fact

have been adjudicated by the lower court in its order of remand?

PARTIES TO THE PROCEEDING

Joy Atkins, a single person, Respondent.

RULE 29.6 LISTING

Pursuant to Rule 29.6 Petitioner Healthpartners of Southern

Arizona, d/b/a Partners Health Plan of Arizona, Inc., is a private

corporation licensed in the State of Arizona with no parents or

subsidiaries.

Co-defendant Carol Marquez, M.D. was not a party to the

Ninth Circuit appeal giving rise to this Petition.

iil

TABLE OF CONTENTS

Page

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Statement of Jurisdiction ............ecccecccecves l

Statutory Provisions Involved .................... l

UM by soccer ce cencdcscsccvcess 5

Sy EE oa a ea 5

a rer 6

C. District Court Proceedings ................. 7

D. Appeal to the Ninth Circuit ................ 9

Reasons for Granting the Writ .................... 10

Contents

I. In The Relationship Between Erisa Removal And

Cobra Conversion, An Enrollee Of A Converted

Cobra Plan Who Terminates Her Converted Plan

Prior To Filing Suit Is Still A “Participant” Of An

Erisa Plan For Purposes Of Removal. ........

Introduction — Public Policy ..........

The Firestone decision .............+..:

Conversion policies under COBRA are

ee rr re re

Former employee claimants and ERISA ..

Eligibility for vested benefits as of the time

Cg Pree reer re eer

“Damages” versus “Benefits” ...........

Il. Appellate Review Of An Order Of Remand Is

Appropriate When Collateral Findings Of

Substantive Issues Of Law And Of Fact Have

Been Adjudicated By The Lower Court In Its

See Ge NS Se icevonk Kes wedcanmeeeas

Conclusion

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Page

— er ee Pe ee tad

Contents

Page

TABLE OF CITATIONS

Cases Cited:

Amalgamated Clothing & Textile Workers v. Murdock,

861 F.2d 1406 (Sth Cir. 19GB) 2. cccccccscvccs 22

Andre v. Salem Technical Servs., 797 F. Supp. 1416

(ke a ere re orp es 28

Berger v. Edgewater Steel Co., 911 F.2d 911 (3rd Cir.),

cert. denied, 499 U.S. 920 (1991) ............... 16

Bixler v. Central Pennsylvania Teamsters Health & Welfare

Fund, 12 F.3d 1292 (3rd Cir. 1993) ............. 23

Boren v. Southwestern Bell Telephone Co., 933 F.2d 891

‘( ® ) ee er ee Peer ee ean 16

Christopher v. Mobil Oil Corp., 950 F.2d 1209 (Sth Cir.),

cert. denied, 506 U.S. 820 (1992) ............05- 15

Clorox Co. v. U.S. District Court, 779 F.2d 517 (9th Cir.

TODS) on cds on hose dkd eee ads ened ieee eee, 25

Crawford v. Lamantia, 34 F.3d 28 (1st Cir.), cert. denied,

US... 115 &, Ch TSRS GP sc cnccvcescen 16, 19

Curtis v. Nevada Bonding Corp., 53 F.3d 1023 (9th Cir.

| eee errr err err rer Te rere Ty ee 16

Contents

Page

Drennan v. General Motors Corp., 977 F.2d 246 (6th

Cir.), cert. denied, 508 U.S. 940 (1993) .......... 15

Executive Software North America, Inc. v. U.S. District

Court, 24 F.3d 1545 (9th Cir. 1994) ......... 9, 10, 24, 26

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

CIDEPD 000 a0us 00'sscewe Ghee vee eee elses passim

Flanagan v. Inland Empire Elec. Workers Pension Plan

& Trust, 3 F.3d 1246 (9th Cir. 1993) ............ 1S, 22

Freeman v. Jacques Orthopaedic & Joint Implant Surgery

Medical Group, 721 F.2d 654 (9th Cir. 1993) ..... 16

Gonzales v. Garner Food Services, Inc., 89 F.3d 1523

(Lith Cis.), cert. denied, _._ U.S. _.. —. §&. Ct. _.,

1997 WL 134367 (U.S., May 19, 1997) ......... 13, 14

Greany v. Western Farm Bureau Life Ins. Co., 973 F.2d

BES Ce Ge Te wee de cesee sien ieee 13

Harris v. Blue Cross and Blue Shield of Alabama, Inc.,

951 7.28 Fas CE GE Te oedkcc ccunccsac’ 24

Harris v. Provident Life and Acc. Ins. Co., 26 F.3d 930

Cree Ce. TR kc sntkkba hdd gee ces 15, 19, 20

Howard v. Gleason Corp., 901 F.2d 1154 (2nd Cir. 1990)

vil

Contents

Page

In Re Glass Workers, Local No. 173, 983 F.2d 725 (6th

Ch SOM “es iatunew sew cnededeendeduawiees yee 25

Joseph v. New Orleans Elec. Pension & Retirement Plan,

754 F.2d 628 (Sth Cir.), cert. denied, 474 U.S. 1006

CSET sdb von s sa ee nee soebeneucns O0beteusens 16, 23

Kuntz v. Reese, 785 F.2d 1410 (9th Cir.), cert. denied,

a Bh | errr rrr rrr errr re 16, 21, 22

Lee v. City of Beaumont, 12 F.3d 933 (9th Cir. 1993) . 25, 26

McDermott v. Lloyds Underwriters, 944 F.2d 1199 (Sth

ss iii ced bene eweed Gears bane tutes 26

Mitchell v. Mobil Oil Corp., 896 F.2d 463 (10th Cir.),

cert. denied, 498 U.S. 898 (1990) ............... 16

Nishimoto v. Federman-Bachrach & Assoc., 903 F.2d 709

OE oi S en cca wener suds cbbestevew es 16, 19

Panaras v. Liquid Carbonic Industries Corp., 74 F.3d

poo 8 ree re ee re 15, 28

Pelleport Investors, Inc., v. Budco Quality Theaters, Inc.,

POL Bele Ste CHU GAs FOE bck eve scnvccenscces 24

Price v. PSA, Inc., 829 F.2d 871 (9th Cir. 1987), cert.

denied, 486 U.S. 1006 (1988) .................. 25

Quackenbush v. Allstate Insurance Co., __ U.S. __, 116

a Se EY eee e acc kek res ede ca ede eee 25

Vili

Contents

Page

Qualls v. Blue Cross of California, Inc., 22 F.3d 839

CN Ee Se heb aneeceseecvindesdennaeseeae 13

Raymond v. Mobil Oil Corp., 983 F.2d 1528 (10th Cir.),

cert. denied, 510 U.S. 822 (1993) ............... 16

Ruocco v. BEHR, Inc., 903 F.2d 1232 (9th Cir.), cert.

Senied, TIS UE. BIO CUO 6 oes ands eWecsewnaic 15, 22

Sallee v. Rexnord Corp., 985 F.2d 927 (7th Cir. 1993)

‘0b exds oka ieee Rene en Fake 5 ce Re ee 16

Schmitt v. Insurance Co. of N. Am., 845 F.2d 1546 (9th

Cal Se aia vad aacde wae Chan encaeeae sean 25

Sommers Drug Stores Co. Employee Profit Sharing Trust

v. Corrigan, 883 F.2d 345 (Sth Cir. 1989) ...... iS, 22. 22

Survival Systems of the Whittaker Corp. v. U.S. District

Court, 825 F.2d 1416 (9th Cir. 1987), cert. denied,

Oe Tis We CE Abba ewdeesenseescenees 26

Teagardener v. Republic-Franklin Inc. Pension Plan, 909

F.2d 947 (6th Cir.), cert. denied, 498 U.S. 1027 (1991)

jn 6 RGb oe whieh ode aaa ean 16

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336

CEP PME y 0.6 bS-60b52 lind aeee wae ene 25

Tingey v. Pixley-Richards West, 953 F.2d 1124 (9th Cir.

FOO. sci abhds top hantntateeseettsicws 13

Contents

Page

United States v. Harper, 729 F.2d 1216 (9th Cir. 1984)

POL PE Pe Err rere rT LTTE ET eee 26, 27

Vartanian v. Monsanto Co., 14 F.3d 697 (ist Cir. 1994)

pldba be Soe abs ne ee 6h bee 4 SdONSR Neh bneee eb ees 15

Willett v. Blue Cross and Blue Shield of Alabama, 953

F.24 1335 (iid Cis. 1992) 2. ccccccvccccscesene 15

Winchester v. Pension Committee of Michael Reese Health

Plan, 942 F.2d 1190 (7th Cir. 1991) ............ 16

Yancy v. American Petrofina, Inc., 768 F.2d 707 (Sth Cir.

EE ch eke eae tas Coke EO Ode OR ede SEER e SR 16, 23

Statutes Cited:

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y ee Tl 2 | er rrr: Te ee ees 25

y Sk ea | rr rer Tre rrr ree ee 3

y OR Eame Bo | errr eT eer er TT ere eee e 24, 25

88 Fake ee rere eS rer rrr ree 24

y BiR Tome | A Fe eee reer crear ere ree 5

29 U.S.C. § 1002(7) ........ 1, 8, 11, 12, 13, 15, 18, 20, 23

Contents

Page

29 U.S.C. § 1024(b) .. 20... eee eee eee eee eee 21

gE ol ge er eee eee eee l

ae TR BURST oo cckeccnsccnsse 2, 7, 13, 15, 24

SP Sheen SOD Sek hae eek eis cesdaees 23

eee eee errr rT Tere rT ere 1,2

ee ac PD 5 Ahab oes dnen cae heiee se edes ye

ee | PRT TERT TTT TOC R TCT CL Tee 3

ee ee Os Oe 0x0 khb enee ka sensacaeuns 1,3

ae Pes RE Kb ern kscnede bs baueeeennes 4

oe Pere ee rr er eer Te eee ree 4

Rule Cited:

supreme Court Rule 10[e) ......cccccccvceccseses 18

APPENDIX

Appendix A — Order of the United States District Court

for the District of Arizona Filed December 5, 1996

sh O HAA w ed C046 bdSENEN ERED SCEREAOHERS SMOKES « la

Appendix B — Order of the United States Court of

Appeals for the Ninth Circuit Filed March 27, 1997

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]

Petitioner, Healthpartners of Southern Arizona, d/b/a

Partners Health Plan of Arizona, Inc., respectfully petitions for

a Writ of Certiorari to review the judgment of the United States

Court of Appeals for the Ninth Circuit.

OPINIONS BELOW

The findings of fact and conclusions of law of the United

States District Court for the District of Arizona, remanding this

action back to state court, are unreported and are reprinted in

Appendix A. The United States Court of Appeals for the Ninth

Circuit’s unpublished Order of March 27, 1997, dismissing the

appeal and denying the petition for writ of mandamus, is

reprinted in Appendix B.

STATEMENT OF JURISDICTION

The Ninth Circuit order was issued on March 27, 1997. This

Court’s jurisdiction is invoked under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

This Petition primarily asks the Court to clarify and apply

the relationship between ERISA and COBRA, to wit: In the

relationship between ERISA removal (29 U.S.C. §§ 1132 and

1144) and COBRA conversion, (29 U.S.C. §§ 1161, ef seq.), is

an enrollee of a converted COBRA plan who terminates her

converted plan prior to filing suit still a “participant” (29 U.S.C.

§ 1002(7)) of an ERISA plan for purposes of removal?

Statutory provisions involved are:

29 U.S.C. § 1002(7) provides as follows:

The term “participant” means any employee

or former employee of an employer, or any

member or former member of an employee

organization, who is or may become eligible

to receive a benefit of any type from an

employee benefit plan which covers

employees of such employer or members of

such organization, or whose beneficiaries

may be eligible to receive any such benefit.

29 U.S.C. § 1132(a)(1)(B) provides as follows:

(a) Persons empowered to bring a civil

action

A civil action may be brought —

(1) by a participant or beneficiary —

* x *

(B) to recover benefits 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. § 1144(a) provides as follows:

(a) Supersedure; effective date

Except as provided in subsection (b) of this

section, the provisions of this subchapter and

subchapter III shall supersede any and all

State laws insofar as they may now or

hereafter relate to any employee benefit plan

described in section 1003(a) of this title and

not exempt under section 1003(b) of this title.

This section shall take effect on January 1,

1975.

28 U.S.C. § 1441(b) provides as follows:

Any civil action of which the district courts

have original jurisdiction founded on a claim

or right arising under the Constitution,

treaties or laws of the United States shall be

removable without regard to the citizenship

or residence of the parties. Any other such

action shall be removable only if none of the

: parties in interest properly joined and served

: as defendants is a citizen of the State in which

: such action is brought.

29 U.S.C. § 1161 provides as follows:

Plans must provide continuation coverage to

certain individuals.

The plan sponsor of each group health plan

shall provide, in accordance with this part,

that each qualified beneficiary who would

lose coverage under the plan as a result of a

qualifying event is entitled, under the plan,

to elect, within the election period,

continuation coverage under the plan.

(a) In General

29 U.S.C. § 1162 provides as follows:

Continuation coverage.

For purposes of section 1161 of this title the

term “continuation coverage” means

coverage under the plan which meets the

following requirements:

(1) Type of benefit coverage. — The

coverage must consist of coverage which, as

of the time the coverage is being provided,

is identical to the coverage provided under

the plan to similarly situated beneficiaries

under the plan with respect to whom a

qualifying event has not occurred. If coverage

is modified under the plan for any group of

similarly situated beneficiaries, such

coverage shall also be modified in the same

manner for all individuals who are qualified

beneficiaries under the plan pursuant to this

part in connection with such group.

29 U.S.C. § 1167 provides as follows:

Definitions and special rules

For purposes of this part —

(1) Group health plan. — The Term “group

health plan” means an employee welfare

benefit plan providing medical care (as

defined in section 213(d) of Title 26) to

participants or beneficiaries directly or

through insurance, reimbursement, or

otherwise... .

(2) Covered employee. — The term

“covered employee” means an individual

who is (or was) provided coverage under a

group health plan by virtue of the

performance of services by the individual for

one or more persons maintaining the plan

(including as an employee defined in section

401(c)(1) of Title 26).

(3) Qualified beneficiary. —

(A) In general. — The term “qualified

beneficiary” means, with respect to a

covered employee under a group

health plan, any other individual who,

on the day before the qualifying event

for that employee, is a beneficiary

under the plan —

(i) as the spouse of the covered

employee, or

(ii) as the dependent child of the

employee.

STATEMENT OF THE CASE

A. Introduction

This action examines the scope of federal court removal

jurisdiction over state court actions brought by a participant in

an employee benefit plan governed by the Employee Retirement

Income Security Act of 1974, 29 U.S.C. §§ 1001, ef seq.

(“ERISA”) when the participant has continued the plan by

COBRA continuation after terminating her employment.

B. Factual Summary

Petitioner Healthpartners of Southern Arizona, d/b/a

Partners Health Plan of Arizona, Inc. (“Partners”), is a health

maintenance organization (“HMO”). Pursuant to its contracts

with employers, Partners administers and arranges for health

care services for employees pursuant to employee benefit plans

established under ERISA. Respondent, Joy Atkins, is a former

employee of an employer which contracted with Partners for a

health benefits plan for its employees. After she left her

employment, Respondent chose to continue her coverage with

Partners under the plan’s COBRA conversion provision. Prior

to filing suit against Partners, she terminated her health coverage

with Partners.

Prior to August 26, 1995, Respondent was employed by El

Dorado Hospital and Medical Center (“El Dorado”) in Tucson,

Arizona. During her employment, she received health benefits

through an employee benefit plan contracted between Partners

and El Dorado, for which El Dorado paid part of the premiums.

A portion of the premiums were also paid by the employees.

On or about August 26, 1995, Respondent terminated her

employment with El] Dorado and began employment with

Professional Nursing Services (“PNS”). Instead of enrolling in

the PNS employee health benefits plan, Respondent chose to

continue her coverage with Partners under her former employer’s

plan COBRA conversion provision, paying her own premiums

in full.

On October 25, 1995, while still covered under her former

employer’s conversion plan and receiving medical services

arranged for by Partners, Respondent suffered a rupture of an

intracranial aneurysm with subsequent brain damage.

Respondent claims that authorization for a CT scan requested

by her physician was delayed by Partners, thereby allowing the

aneurysm to rupture before a timely diagnosis could be made.

She claims that the “coverage dispute relating to benefits denied

[by Partners]” (see section “C” below) was the cause of the

ruptured aneurysm.

Respondent apparently terminated her COBRA conversion

plan coverage with Partners effective November 1, 1995, at

which time she enrolled in an employee benefit plan with her

new employer to be effective on November 1, 1995. Respondent

filed suit on or about June 7, 1996.

C. District Court Proceedings

Respondent sued Partners in the Superior Court for Pima

County, Arizona on or about June 7, 1996, approximately seven

months after terminating her COBRA conversion plan with

Partners. On or about June 11, 1996, a First Amended Complaint

was filed to correct some clerical errors in the Complaint.

Respondent’s Amended Complaint stated four causes of action:

(1) breach of contract (alleging that Partners withheld consent

for a medically necessary diagnostic test, specifically a CT scan);

(2) negligence; (3) negligence per se (alleging violation of an

Arizona statute); and (4) bad faith.

On or about July 1, 1996, Partners timely removed the state

court action to the United States District Court for the District

of Arizona, on the grounds that all of Respondent’s state law

claims were preempted by ERISA, 29 U.S.C. §§ 1132(a)(1)(B)

and 1144(a); at the same time, Partners filed its Answer to the

Complaint in the United States District Court. On or about July

2, 1996, Partners filed its Amended Notice of Removal and its

Answer to the First Amended Complaint in the United States

District Court.

On or about July 19, 1996, Respondent filed her Objection

to Removal and Motion for Remand in the United States District

Court, arguing that the United States District Court did not have

original jurisdiction of this “coverage dispute relating to benefits

denied [by Partners}” because she was not a “participant” in an

employee benefit plan as defined by ERISA, 29 U.S.C.

§ 1002(7). Respondent’s argument continues: since she was

not a participant, she had no standing to sue under ERISA; since

she had no standing under ERISA, ERISA did not apply; since

ERISA did not apply, this case cannot be removed. Thus, the

heart of Respondent’s argument was that, because she exercised

COBRA rights, she was not subject to ERISA.

Partners filed its Response to Plaintiff’s Motion for Remand

on or about July 29, 1996, arguing that Respondent was indeed

a plan “participant”; in fact, without the plan, Respondent would

have no claim at all against Partners. Since Respondent was a

former employee who had received benefits under the ERISA

plan’s conversion provision, the definition of “participant” was

satisfied; the subsequent termination of her conversion plan

before filing her lawsuit had no bearing on her status as a plan

“participant” as defined by ERISA.

On December 5, 1996, the United States District Court

issued its Order remanding the case back to the state court,

issuing substantive findings of fact and conclusions of law,

including, but not limited to, the following:

(1) Respondent was not a plan “participant” under her

conversion plan because:

[her] claim was filed long after she had left

her employment at El Dorado and long after

her employer had ceased contributing toward

her Partners insurance premiums. This is

persuasive evidence that the Plaintiff was not

an ERISA “participant.”

(App. A, p. 6a); thus rejecting this Court’s ruling in Firestone

Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (App. A, pp.

6a-7a). For reasons which are not important to this petition, the

District Court did not have before it nor did it consider the

controlling precedents, in addition to Firestone.'

(2) Respondent did not have standing to sue under ERISA

because as of the date she filed the lawsuit, she had terminated

her conversion coverage under the plan (App. A, pp. 8a-1 1a).

(3) Since Respondent was suing for monetary “damages”

instead of for “benefits,” she did not have standing to sue under

ERISA (App. A, p. 11a).

(4) As a matter of law, Respondent’s “damages action”

was “such a tenuous, remote, and peripheral consequence of

her employment” that it did not relate to her former employer's

ERISA plan (App. A, p. 12a).

D. Appeal to the Ninth Circuit

On December 27, 1996, Partners filed its Notice of Appeal

of the District Court’s decision to the Ninth Circuit Court of

Appeals, on the grounds that the District Court’s remand order

established substantive findings of fact and conclusions of law.

Respondent filed her Motion to Dismiss Appeal on or about

February 7, 1997, arguing that the District Court’s remand order

was not an appealable final judgment pursuant to Executive

1. See argument 1(C) below. The law is clear that a conversion policy

for health benefits obtained pursuant to an ERISA plan is still an ERISA

plan.

Software North America, Inc. v. U.S. District Court, 24 F.3d

1545 (9th Cir. 1994).

Partners filed its Opposition to Motion to Dismiss And

Petition for Writ of Mandamus, arguing that the remand order

was appealable because the order reached substantive issues;

alternatively, since the District Court erred as a matter of law,

review by mandamus was appropriate.

The Ninth Circuit issued its one-paragraph Order on March

27, 1997, dismissing Partners’ appeal for lack of jurisdiction

and denying Partners’ petition for writ of mandamus (App. B,

p. 13a).

REASONS FOR GRANTING THE WRIT

This Petition presents important legal issues (the

relationsnip between ERISA and COBRA conversion) which

apply to almost 150,000,000 Americans, most of whom are

covered under ERISA-governed employee benefit plans, either

as employees or as former employees.? Given the broad

application of these two statutes to millions of Americans and

the importance of the health benefits protected by these statutes,

this Court should clarify the proper relationship between

COBRA and ERISA on the questions presented.

This Petition also gives this Court the opportunity to give

guidance to millions of employees and plans as well as to correct

a clear error of law by the two lower courts in blatant disregard

2. In 1995, 59.1 million Americans were enrolled in HMO plans, and

90 million were covered under PPO plans. In 1996, the HMO coverage rose

to 67.5 million (no data is yet available for PPO coverage in 1996). Of the

149.1 million 1995 HMO and PPO plan enrollees, the great majority were

members of ERISA-governed employee benefit plans, either as employees

or as former employees with COBRA conversion policies. American

Association of Health Plans, Division of Statistics, Washington, D.C.

of federal law and of this Court’s ruling in Firestone: (1) a former

employee covered under conversion benefits pursuant to her

former employer’s ERISA-governed employee health benefit

plan is still a plan “participant” as defined by section 1002(7);

and (2) a “participant” in an ERISA-governed employee health

benefit plan cannot obviate Congress’ clear intent to completely

preempt this area of law by simply terminating her health benefit

coverage before filing suit against the ERISA pian for monetary

damages, thus claiming lack of standing to sue under ERISA.

Resolution of these questions (and the underlying policy

regarding removal and remand of ERISA cases) has a broad

societal application, as an ever-increasing number of Americans

is receiving health benefits through ERISA-governed employee

benefit plans. As employees leave their employment or are

terminated (especially in the current era of corporate

“downsizing”), more and more Americans are using their former

employers’ COBRA conversion health policies for continuing

health coverage.

Consequently, there is a compelling public policy reason

for the Court to consider and resolve these issues so that the

millions of working Americans and their employers can be

assured fair and uniform treatment throughout the federal court

system.

IN THE RELATIONSHIP BETWEEN ERISA

REMOVAL AND COBRA CONVERSION, AN ENROLLEE

OF A CONVERTED COBRA PLAN WHO TERMINATES

HER CONVERTED PLAN PRIOR TO FILING SUIT IS

STILL A “PARTICIPANT” OF AN ERISA PLAN FOR

PURPOSES OF REMOVAL.

A. Introduction — Public Policy

Certiorari should be granted to clarify and confirm that the

correct interpretation of “participant” is the Firestone

interpretation, which includes a former employee, such as

Respondent, with a colorable claim that she will prevail in a

suit for benefits. It is important to clarify this application because

of the very large number of plan participants and former

employees who are still plan participants under conversion

policies.

B. The Firestone decision

This Court, in Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101 (1989), settled a dispute over who was a “participant”

as defined by ERISA, 29 U.S.C. § 1002(7) with standing to sue

an employee benefit plan for benefits denied. The Court held:

In our view, the term “participant” is

naturally read to mean either “employees in,

or reasonably expected to be in, currently

covered employment,” [citation omitted], or

former employees who “have ... a

reasonable expectation of returning to

covered employment” or who have “a

colorable claim” to vested benefits [citation

omitted]. In order to establish that he or she

“may become eligible” for benefits, a

claimant must have a colorable claim that (1)

he or she will prevail in a suit for benefits, or

that (2) eligibility requirements will be

fulfilled in the future. [emphasis added.]

Id., 489 U.S. at 117-118.

In order to assure Congress’ clear intent to apply ERISA

uniformly throughout the states (and especially its intent to

completely preempt claims under 29 U.S.C. § 1132(a)(1)(B)),

this Court should take this opportunity to clarify its application

of the term “participant” as defined by ERISA. This Court should

rule, consistent with Firestone, that the reference to “former

employee” in section 1002(7) includes all those former

employees (whether or not they are still “enrollees” in the benefit

plan when they file suit) who have colorable claims to vested

benefits while they were enrolled in the plan (including those

who were enrolled in COBRA plans). These former employees

(including Respondent) are subject to ERISA and removal.

C. Conversion policies under COBRA are covered by ERISA

The law is clear in the Ninth Circuit as well as other circuits

that a conversion policy for health benefits obtained pursuant to

a former employer’s ERISA plan is still an ERISA plan. Qualls

v. Blue Cross of California, Inc., 22 F.3d 839 (9th Cir. 1994);

Tingey v. Pixley-Richards West, 953 F.2d 1124 (9th Cir. 1992);

Greany v. Western Farm Bureau Life Ins. Co., 973 F.2d 812 (9th

Cir. 1992); Howard v. Gleason Corp., 901 F.2d 1154 (2nd Cir.

1990); Gonzales v. Garner Food Services, Inc., 89 F.3d 1523,

1524, n.3 (11th Cir.), cert. denied, _. U.S. _, __ S. Ct. _,

1997 WL 134367 (U.S., May 19, 1997) (“COBRA [29 U.S.C.

§§ 1161, et seg. (1994)] amended ERISA to require each

employer to allow former employees to elect to continue

coverage under the employer’s group health insurance plan for

up to 18 months following termination of employment.”).

Indeed, ERISA itself provides for conversion policies in its

COBRA provisions (see Gonzales, supra). Unfortunately, the

courts in the instant case ruled that Respondent’s conversion

policy was not an ERISA plan simply because it was an

“individual policy” rather than a group plan and because

Respondent’s employer no longer contributed toward the

premiums. Their blatant disregard of ERISA, COBRA and

existing law needs to be corrected by this Court.

D. Former employee claimants and ERISA

The circuits have created two categories of former employee

claimants: (1) those who claim benefits from the period of time

while they were covered under the plan; these claimants may

sue under ERISA; and (2) those who were never enrolled in the

plan or who have already received all of the benefits to which

they were entitled under the plan; these claimants may not sue

under ERISA. This Court must clarify these two classes of

former employee claimants so that both plans and employers as

well as claimants know their rights and responsibilities. It is

very important to the orderly administration of plan benefits

that this Court clarify and confirm the application of ERISA to

the first category, above, including Respondent. As is argued

below, in this case the lower courts confused the categories and

misapplied them. This misapplication must be clarified for the

benefit of all employers and participants alike.

When, as here, the former employee claimant is suing based

upon benefits from when claimant was in the plan, it does not

matter that claimant was in a COBRA plan when suit was filed.

Regarding the first category (claims while covered by the

plan), the majority of the circuits (including the Ninth) which

have reviewed this issue have relied upon Firestone to hold that

former employees certainly have the right to sue an employee

welfare benefit plan if while covered under the plan, they did

not receive a benefit to which they were entitled, pursuant to

29 U.S.C. §§ 1132(a)(1)(B) and 1002(7).?

Regarding the second category (a former employee who

was never enrolled in the plan or who had already received

all the benefits to which he/she was entitled), these claimants

do not have standing to sue under ERISA because there would

be no remaining benefits to claim.‘

3. Flanagan v. Inland Empire Elec. Workers Pension Plan & Trust, 3

F.3d 1246 (9th Cir. 1993) (“terminated non-vested participants” had standing

to sue for monetary damages and injunctive relief against ERISA plan);

Ruocco v. BEHR, Inc., 903 F.2d 1232 (9th Cir.), cert. denied, 498 U.S. 899

(1990) (former employees presented colorable claim to entitlement to surplus

dividend even though they had already received vested benefits); Drennan v.

General Motors Corp., 977 F.2d 246 (6th Cir.), cert. denied, 508 U.S. 940

(1993) (class members were eligible for the plan at the time the asserted

breach of fiduciary duty occurred and thus had standing to sue as participants

under ERISA); Willett v. Blue Cross and Blue Shield of Alabama, 953 F.2d

1335 (11th Cir. 1992) (employees were plan participants even though the

plan was suspended before the date on which benefits were to begin);

Vartanian v. Monsanto Co., 14 F.3d 697 (1st Cir. 1994) (plaintiff who would

have been entitled to greater benefits but for breach was a participant with

standing); Sommers Drug Stores Co. Employee Profit Sharing Trust v.

Corrigan, 883 F.2d 345 (Sth Cir. 1989) (same); Christopher v. Mobil Oil

Corp., 950 F.2d 1299, 1221 (Sth Cir.), cert. denied, 506 U.S. 820 (1992)

(“employer should not be able through its own malfeasance to defeat the

employee’s standing”); Panaras v. Liquid Carbonic Industries Corp., 74 F.3d

786 (7th Cir. 1996) (former employee had standing to sue employer as

participant for ERISA severance plan benefits).

4. Harris v. Provident Life and Acc. Ins. Co., 26 F.3d 930 (9th Cir. 1994)

(Cont'd)

Respondent in this case was clearly in the first category of

former employee claimants (those claiming benefits while they

were covered under the plan). Thus, her case was subject to

ERISA and should have been removed. However, the District

Court and Ninth Circuit panel in the case at bar have ignored

their own circuit’s precedent (supported by the other circuits

cited above) when applying the concept of whether a former

(Cont'd)

(former employee had never been enrolled in benefit plan and thus had no

Standing to sue pursuant to the two-part test of Firestone); Freeman v. Jacques

Orthopaedic & Joint Implant Surgery Medical Group, 721 F.2d 654 (9th Cir.

1993) (same); Curtis v. Nevada Bonding Corp., 53 F.3d 1023 (9th Cir. 1995)

(same); Boren v. Southwestern Bell Telephone Co., 933 F.2d 891 (10th Cir.

1991) (same); Nishimoto v. Federman-Bachrach & Assoc., 903 F.2d 709 (9th

Cir. 1990) (former employee who settled ERISA claim during litigation no

longer had standing); Sallee v. Rexnord Corp., 985 F.2d 927 (7th Cir. 1993)

(former employee who had voluntarily left employment knowing that

severance benefits did not vest unless employee was terminated did not have

standing); Berger v. Edgewater Steel Co.,911 F.2d 911 (3rd Cir.), cert. denied,

499 U.S. 920 (1991) (retirees who had already received special payment lacked

Standing); Kuntz v. Reese, 785 F.2d 1410 (9th Cir.), cert. denied, 479 U.S.

916 (1986) (former employees whose vested benefits had been distributed in

lump sum lacked standing); Mitchell v. Mobil Oil Corp., 896 F.2d 463 (10th

Cir.), cert. denied, 498 U.S. 898 (1990) (same); Raymond v. Mobil Oil Corp.,

983 F.2d 1528 (10th Cir.), cert. denied, 510 U.S. 822 (1993) (same); Joseph

v. New Orleans Elec. Pension & Retirement Plan, 754 F.2d 628 (Sth Cir.),

cert. denied, 474 U.S. 1006 (1985) (same); Yancy v. American Petrofina, Inc.,

768 F.2d 707 (Sth Cir. 1985) (per curiam) (same); Winchester v. Pension

Committee of Michael Reese Health Plan, 942 F.2d 1190 (7th Cir. 1991)

(same); Teagardener v. Republic-Franklin Inc. Pension Plan, 909 F.2d 947

(6th Cir.), cert. denied, 498 U.S. 1027 (1991) (former employees who had

received vested benefits upon partial termination of the plan were no longer

“participants” with standing to sue for residual benefits that subsequently

vested); Crawford v. Lamantia, 34 F.3d 28 (ist Cir.), cert. denied, __ U.S.

—, 115 S. Ct. 1393 (1995) (plaintiff who was a current employee at the time

of filing suit, but was a former employee having collected all vested benefits

due at time of filing of first amended complaint, lacked standing under first

prong of Firestone).

employee “may be eligible” to receive vested benefits under

ERISA if she is not still enrolled in the benefit plan at the time

the lawsuit is filed. The courts in this case seem to have

misunderstood this concept, either: (1) by interchanging the

terms “enrollee” and “participant” (thus leading to the narrow

improper interpretation that to be a “participant” Respondent

had to be “enrolled” on the date suit was filed); or (2) by blatantly

ignoring this Court’s decision in Firestone, as the Ninth Circuit

panel in this case did when it condoned the District Court’s

decision which cited but then discounted Firestone. This Court

must clarify the misunderstanding so that employers, plans,

employees and the courts know the correct rules.

The District Court’s Order herein was clearly but improperly

motivated by its distress at Congress’ failure to provide the

Respondent with the full range of remedies she would have under

state law.’ However, the law is crystal clear on this subject. A

plaintiff who is a former employee at the time suit is filed is

clearly entitled to sue under ERISA, if she meets one of the two

requirements set forth by this Court in Firestone which

Respondent does. Respondent was not suddenly stripped of her

standing to sue under ERISA merely because of her “former

employee” status when she filed suit. Therefore, ERISA applies

and removal was proper.

In its refusal to review the lower court’s decision, the Ninth

Circuit has taken a stand directly in conflict with: the decision

5. Indeed, the District Court echoed Respondent’s counsel’s complaint

against the allegedly unfair treatment Congress has created for Respondent

by stating in its Order that ERISA “has frequently had the opposite effect of

depriving employees of rights they had under state law without providing a

corresponding federal remedy” (App. A, p. 4a), and noting “ ‘the remarkable

legerdemain that has turned a statue [sic] designed to protect employee pension

rights into a law that strips them of most of the protection they previously

enjoyed under state law. . .’” [citations omitted]. (App. A, p. 5a).

of this Court; its own decisions; the decisions of the other

circuits; and section 1002(7) as enacted by Congress.

As the Ninth Circuit has departed so far from the accepted

and usual course of judicial proceedings by sanctioning such

departure by the lower court, this Court should exercise its

supervisory power by granting certiorari pursuant to Rule 10(a).

E. Eligibility for vested benefits as of the time suit is filed

The District and Ninth Circuit courts in this case have gone

beyond any logical interpretation of Firestone. They ignored their

own Circuit's law (which is supported by the majority of circuits)

in applying to a former employee plaintiff the concept of

eligibility for vested benefits at the time the lawsuit is filed.

Since the lower courts are confused about the proper application,

this Court should clarify it.

The correct application of law is as follows: the plaintiff’s

right to commence the suit under ERISA is decided on the day

of filing; the right to continue the case under ERISA is decided

later. Thus: (1) on the date suit is filed, the court determines if

the plaintiff (Respondent in this case) meets either of the two

Firestone tests for former employees (a reasonable expectation

of returning to covered employment or a colorable claim to

vested benefits). If plaintiff meets either test, then the suit

properly starts under ERISA (including removal) in federal

court. (2) At a later date, the court may reconsider whether

plaintiff still meets either of the two Firestone tests. If plaintiff

still meets either test, the case stays under ERISA in federal

court. However, if during the pendency of the lawsuit, plaintiff

fails to meet either Firestone test, then ERISA jurisdiction

(including removal) may end. The federal court may then

exercise its discretion to keep the case in federal court or remand

any state law claims to state court.

An example of these rules is Nishimoto v. Federman-

Bachrach & Assoc., 903 F.2d 709 (9th Cir. 1990). In Nishimoto,

plaintiff properly began her suit under ERISA because she was

a former employee who was eligible to receive vested benefits

at the time she filed suit. However, after the suit was started,

plaintiff compromised her right to be in federal court because

during the course of the litigation, the plaintiff accepted a lump

sum payment of all her vested benefits from her employer. After

the settlement, plaintiff no longer met either Firestone test —

she would not return to covered employment and all her vested

benefits had been paid by the settlement. The Ninth Circuit ruled

that because plaintiff's settlement of the ERISA claim

constituted a “receipt of all the benefits she was due under the

plan ... the ERISA claim might have become subject to

dismissal at that point.” Jd. at 715.

However, Nishimoto continues that because the suit was

properly started under ERISA, the federal court could exercise

its discretion to keep the remaining state law claims in federal

court. “Thus, Nishimoto’s status at the time of filing was critical

only as to whether the [federal] court was deprived of the power

to adjudicate the remaining pendent state claims.” Crawford

v. Lamantia, 34 F.3d 28, 32 n.5 (ist Cir. 1994). (Emphasis

added).

Another example of these rules is Harris v. Provident Life

and Acc. Ins. Co., 26 F.3d 930 (9th Cir. 1994) which was heavily

relied upon by Respondent to argue that she had no standing to

sue under ERISA (and thus avoided ERISA removal) because

at the time she filed her Complaint against Petitioner, she had

terminated her health benefit plan with Petitioner. Harris,

however, makes no such ruling; Respondent misinterpreted and

misquoted its holding.

In Harris, the court looked to the plaintiff’s status as a

former employee at the time he filed suit only because he had

never been enrolled in the employee benefit plan; obviously, he

had never been a plan “participant.” Therefore he had no standing

at any time to sue under ERISA to recover benefits to which he

was never entitled. The only reason the court was interested in

his status at the time of filing suit was to determine whether he

was an employee or a former employee, at which point this

Court’s two-part test for former employees, set forth in Firestone,

would be applied to render him a plan “participant” or not under

section 1002(7). Since Harris had argued that during his actual

employment, he reasonably expected to become a participant,

the court had to decide the issue: “Whether a person is a plan

participant must be decided as of the time of the filing of the

lawsuit.” Jd. at 933. Mr. Harris, at the time he filed suit, was a

former employee who met neither of the two tests under

Firestone.

The District Court in the instant case took the Harris court’s

quotation out of context when it ruled that Respondent was not

a plan “participant” because at the time she filed her lawsuit

she had no benefit plan with Petitioner. This ruling is clearly in

error and in contravention of Ninth Circuit law, but the Ninth

Circuit itself let it stand, thus creating bad law.

Properly, the lower court should have considered whether

Respondent (plaintiff below) met either Firestone test on the

day suit was filed. Since Respondent did meet the test, her suit

was under ERISA (including removal).

Since the lower courts are obviously confused about how

to apply the Firestone tests, this Court must clarify that

application.

F. “Damages” versus “Benefits”

The District and Ninth Circuit courts in this case have

seriously confused the terms “damages” and “benefits” in the

context of ERISA. This Court should clarify the point.

The mere fact that an artfully pleaded state law Complaint

may contain language asking for “damages” has no bearing on

the fact that it is really a claim under ERISA for health benefits

(a CT scan), allegedly denied or withheld. Simply because

Respondent has characterized her withheld benefits as

“damages” in her Complaint does not miraculously turn them

into state common law compensatory and punitive damages,

which are not available under ERISA.

Both Respondent and the District Court have ignored the

clear law of the Ninth Circuit and have purported to cite Ninth

Circuit rulings they believe stand for their convoluted proposition

that merely asking for “damages” in a complaint renders

Respondent ineligible to sue under ERISA and therefore immune

to ERISA removal. They are wrong; their arguments are merely

semantic. The Ninth Circuit case law stands for no such

proposition. The instant Ninth Circuit panel has refused to

correct such a convoluted finding, resulting in Petitioner being

treated differently from all other ERISA plans, in contravention

of the clear intent of Congress.

Those Ninth Circuit (and other circuit) cases that discuss

the issue of “damages” versus “benefits” under ERISA deal with

claims for statutory damages for breach of fiduciary duties in

failing to disclose information under ERISA (29 U.S.C.

§ 1024(b)), not with employee welfare benefits withheld or

denied. Those claimants (like Respondent) who seek benefits

are still under ERISA and subject to removal.

In Kuntz v. Reese, 785 F.2d 1410 (9th Cir. 1986), cert.

denied, 479 U.S. 916 (1986), the court ruled that former

employees were not plan “participants” as defined by ERISA

and that their “damages” claim was not a “plan benefit” within

the meaning of ERISA. However, the court reached this

conclusion only because, since the former employees had already

received their “vested benefits” in a lump sum, they received

all they were due and were not “eligible to receive a benefit” or

likely to become so, as of the time they filed their lawsuit. “The

Kuntz plaintiffs do not allege that their vested benefits were

improperly computed, rather they allege breach of fiduciary duty

or of a duty to disclose information about benefits, thus any

recoverable damages would not be benefits from the plan.” Jd.

at 1411. Since they were not “participants,” they did not have

standing to sue the plan administrator under ERISA.

He ver, Kuntz did not stand for the proposition that all

plaintiffs who had received all their vested benefits would be

denied standing. (See Flanagan and Ruocco, supra.) The breach

of fiduciary duty claims of those who had accepted lump sum

benefits were distinguished in another Ninth Circuit decision,

Amalgamated Clothing & Textile Workers v. Murdock, 861 F.2d

1406 (9th Cir. 1988): although the plaintiffs had “received their

actuarily vested plan benefits,” a constructive trust in their favor

“may be construed as a ‘benefit of any type from an employee

benefit plan.’ ” Jd. at 1417-18. In that case, the court found that

plaintiffs were still plan “participants” with standing to sue under

ERISA.

In Sommers Drug Stores Co. Employee Profit Sharing Trust

v. Corrigan, 883 F.2d 345 (Sth Cir. 1989), the court reasoned as

follows:

The distinction between “benefits” and

“damages” is not clear. This is in part

attributable to use of words with overlapping

meaning to describe mutually exclusive

categories. ... Clearly, a plaintiff alleging

that his benefits were wrongly computed has

a claim for vested benefits. . .. On the other

hand, a plaintiff who seeks the recovery for

the trust of an unascertainable amount, with

no demonstration that the recovery will

directly effect payment to him, would state a

claim for damages, not benefits.

Id. at 349-350. In Sommers, the plaintiffs claimed that the

amount received was not the full amount of vested benefits due;

therefore, they were still eligible to receive the remaining amount

of their vested benefits and had standing as plan “participants.”

In two other Fifth Circuit cases, however, the court ruled the

plaintiff did not have standing because he had already received

his vested benefits in full. Yancy v. American Petrofina, Inc.,

768 F.2d 707, 709 (5th Cir. 1985) and Joseph v. New Orleans

Electrical Pension & Retirement Plan, 754 F.2d 628, 630 (Sth

Cir. 1985) (whose claims were held to be for “damages” for an

additional amount under a plan amendment that was enacted

after they had already received lump sum vested benefits

pursuant to early retirement and were ineligible to receive future

payments). 7

Finally, Bixler v. Central Pennsylvania Teamsters Health &

Welfare Fund, 12 F.3d 1292 (3rd Cir. 1993) stands for the

proposition that a former employee can indeed sue an employee

welfare benefit plan for “damages” under ERISA, 29 U.S.C.

§ 1132(a)(3)(B) in a direct action for breach of fiduciary duty.

In the case at bar, Respondent’s claim is clearly not one for

“damages” (even under ERISA), even though she uses that word

in her complaint, but rather to recover a benefit denied under

her health plan, which she has already acknowledged (see

Statement of the Case, “B” and “C” above). She is clearly a

plan “participant” under section 1002(7) and is suing “to recover

benefits ... under the terms of the plan” pursuant to section

1132(a)(1)(B). Thus, she has standing to sue under ERISA, and

her state law claims are completely preempted by ERISA;

therefore, removal was proper.

This Court should grant certiorari to correct the egregious

errors of law by the District Court and the Ninth Circuit in

blatantly disregarding this Court’s binding precedent in

Firestone.

Il.

APPELLATE REVIEW OF AN ORDER OF REMAND

IS APPROPRIATE WHEN COLLATERAL FINDINGS OF

SUBSTANTIVE ISSUES OF LAW AND OF FACT HAVE

BEEN ADJUDICATED BY THE LOWER COURT IN ITS

ORDER OF REMAND.

Unless this Court reverses the Ninth Circuit’s decision

dismissing the appeal and denying the petition for writ of

mandamus, the purpose of ERISA will be clearly frustrated; the

scope of ERISA applicability will be improperly narrowed in

direct conflict with the clear purpose of ERISA as interpreted

by this Court in Firestone.

Ordinarily, remand orders based on a lack of subject matter

jurisdiction as identified in 28 U.S.C. § 1447(c) are not

reviewable by appeal or otherwise. 28 U.S.C. § 1447(d);

Executive Software North America Inc., supra, 24 F.3d at 1549.

However, a remand order may be reviewed on appeal as a final

collateral order if the order resolves the merits of a matter of

substantive law apart from jurisdictional decisions. Pelleport

Investors, Inc. v. Budco Quality Theaters, Inc., 741 F.2d 273,

276-78 (9th Cir. 1984); Harris v. Blue Cross and Blue Shield of

Alabama, Inc., 951 F.2d 325, 327 (11th Cir. 1992). If the grounds

for the remand fall outside the scope of § 1447(c), the remand

order is reviewable pursuant to a writ of mandamus. Price v.

PSA, Inc., 829 F.2d 871, 874 (9th Cir. 1987), cert. denied, 486

U.S. 1006 (1988); see also Schmitt v. Insurance Co. of N. Am.,

845 F.2d 1546 (9th Cir. 1988); and Jn Re Glass Workers, Local

No. 173, 983 F.2d 725, 727 (6th Cir. 1993).

As a practical matter, the line between mandamus and appeal

can often be subtle. Clorox Co. v. U.S. District Court, 779 F.2d

517 (9th Cir. 1985). The court has discretion to treat an appeal

as a petition for writ of mandamus (or vice versa) when

appropriate. Lee v. City of Beaumont, 12 F.3d 933, 936 (9th

Cir. 1993).

Mandamus and/or appeal are appropriate in this case because

the District Court’s remand order was not based solely on a

conclusion that the court lacked subject matter jurisdiction.

Rather, the District Court made collateral substantive findings

that: (1) Respondent was not a plan “participant” at the time

she filed suit, and (2) Respondent’s claim was not one for

“benefits” due under a plan but for “monetary damages.”

A recent decision by this Court holds that there exists a

class of collateral orders which do not meet the definition of

finality, but which are nevertheless immediately appealable

under 28 U.S.C. § 1291 because they conclusively determine a

disputed question that is separate from the merits and effectively

unreviewable on appeal from a final judgment but too important

to be denied review. Quackenbush v. Allstate Insurance Co.,

__ U.S. __, 116 S. Ct. 1712 (1996). In Quackenbush, this

Court abrogated its decision in Thermtron Products, Inc. v.

Hermansdorfer, 423 U.S. 336 (1976), that “an order remanding

a removed action does not represent a final judgment reviewable

by appeal.” Jd. at 352-353.

The Ninth Circuit (as well as others) has held that remand

orders, including those based on jurisdictional decisions, are

reviewable by mandamus. Lee, supra, 12 F.3d at 936;

McDermott v. Lloyds Underwriters, 944 F.2d 1199 (Sth Cir.

1991). The Ninth Circuit panel in this case, however, has refused

to follow its own circuit’s precedent and has abused its discretion

in denying the petition for a writ of mandamus when Petitioner

has clearly met each and every one of the five guidelines for

mandamus (discussed below), leaving Petitioner with no other

remedy to pursue.

The guidelines for determining whether mandamus is proper

are as follows: (1) the party seeking the writ has no other

adequate means, such as direct appeal, to attain the relief desired;

(2) the petitioner will be damaged or prejudiced in a way not

correctable on appeal; (3) the district court’s order is clearly

erroneous as a matter of law; (4) the district court’s order is an

oft-repeated error or manifests a persistent disregard of federal

rules; or (5S) the district court’s order raises new and important

problems, or issues of law of first impression. Executive Software

North America, Inc., supra, 24 F.3d at 1550-51, citing United

States v. Harper, 729 F.2d 1216, 1221-22 (9th Cir. 1984). Not

all five factors need to be satisfied; and the third factor [the

existence of clear error as a matter of law] is dispositive.

Survival Systems of the Whittaker Corp. v. U.S. District Court,

825 F.2d 1416 (9th Cir. 1987), cert. denied, 484 U.S. 1042

(1988). }

As discussed below, each of the elements necessary for

mandamus is present in this case; therefore, the Ninth Circuit's

order denying Petitioner’s request for review by mandamus was

in error and should be reversed. Regarding the first element,

since Partners’s appeal was dismissed by the Ninth Circuit,

Partners has no other means to review the lower court’s remand

order. Regarding the second element, the remand order clearly

creates prejudice against Partners which cannot be corrected

on appeal, by depriving Partners of the procedures and processes

of the federal forum and the expertise of the federal courts in

applying the federal law of ERISA; also, Partners will be

severely prejudiced if required to wait until the conclusion of

state court litigation to appeal the remand order. Regarding the

fourth element, the District Court's error in this clearly ERISA-

governed case is often repeated because of the uncertainty of

ERISA preemption/removal law; since the number of ERISA

cases is growing, more opportunities for erroneous rulings will

be created. Regarding the fifth element, the “new and

important problem” raised by the District Court in its Order

is, incredibly, its finding that because Respondent had terminated

her conversion policy prior to filing suit, and apparently simply

because she was a former employee, she was no longer reachable

by ERISA. The District Court’s order creates a new and

important problem because it is a finding in direct conflict with

every other federal decision involving former employees this

Petitioner was able to locate and blatantly disregards this Court’s

two-prong test for former employees in Firestone. The District

Court creates a new problem by giving a brand new meaning to

the term “former employee,” as discussed herein.

Finally, as to the most important third element, the District

Court’s order was clearly erroneous as a matter of law. “A

question of law is ‘clearly erroneous’ for the purposes of a

mandamus petition if we are ‘left with the definite and firm

conviction that a mistake has been committed.’ [citation omitted]

(quoting United States v. United States Gypsum Co., 333 U.S.

364, 395 (1948)).” United States v. Harper, supra, 729 F.2d at

1222.

This case more than justifies a definite and firm conviction

that a mistake was made, requiring review of the remand order.

If this District Court’s erroneous interpretation of the term

“participant” were valid, every former employee no longer

covered by his/her employer’s health benefits plan would be

beyond the reach of ERISA. In fact, according to this District

Court, every currently published case involving former

employees would have to hold that they had no standing to sue

under ERISA because the cases were filed after the former

employees’ plan coverage had terminated (which of course these

cases did not so rule).

The error of this District Court has been recognized and

condemned by other courts. “[A]n overly technical and narrow

reading of the Supreme Court’s reference to ‘vested benefits’

[in Firestone) would lead to the result that ‘no former employee

could bring an ERISA claim for welfare benefits allegedly

accrued during employment.’ Panaras v. Liquid Carbonic

Industries Corp., 74 F.3d 786, 791 (7th Cir. 1996), citing Andre

v. Salem Technical Servs., 797 F. Supp. 1416, 1422 (N.D. IIl.

1992). This Court has stated, in granting standing to former

employees, that “[iJn order to establish that he or she ‘may

become eligible’ for benefits, a claimant must have a colorable

claim that (1) he or she will prevail in a suit for benefits. . . .”

Firestone, 489 U.S. at 117-118. “This language suggests not

the narrow, technical reading of the phrase ‘vested benefits’

adopted by the district court, but a more expansive

interpretation.” Panaras, supra, 74 F.3d at 791.

As the Seventh Circuit corrected the district court’s error in

Panaras, so should the Ninth Circuit have done in the instant

case; this Court should do so now.

CONCLUSION

For all of the foregoing reasons, Petitioner respectfully

requests that its petition for a writ of certiorari be granted.

Respectfully submitted,

DAVID E. MANOOGIAN

Counsel of Record

JEAN M. JONES

JOANNA JESPERSON

EPSTEIN, BECKER

& GREEN, P.C.

1227 25th Street, N.W.

Suite 700

Washington, DC 20037-1156

(202) 861-0900

D. THOMPSON SLUTES

SLUTES, SAKRISON, GRANT,

HILL & RUBIN

33 North Stone

Suite 1100

Tucson, Arizona 85701

(520) 624-6691

Attorneys for Petitioner

APPENDIX A — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE DISTRICT OF ARIZONA

FILED DECEMBER 5§, 1996

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

No. CIV 96-443-TUC-FRZ

JOY D. ATKINS, a single person,

Plaintiff,

VS.

HEALTHPARTNERS OF SOUTHERN ARIZONA, dba

PARTNERS HEALTH PLAN OF ARIZONA, INC.,

Defendant.

ORDER

I. INTRODUCTION

Plaintiff Joy D. Atkins was an employee of El Dorado

Hospital and Medical Center in Tucson. During her employment

there, Plaintiff received health insurance through Defendant.

Partners Health Plan of Arizona (“Partners”). This HMO plan

was made available to the employees of El] Dorado, which paid

a portion of the insurance premiums for its employees as a

benefit.

On or about August 25, 1995, Plaintiff terminated her

employment with El Dorado and went to work for Professional

Nursing Services (PNS). PNS offered its employees health

Appendix A

coverage under a different HMO plan, CIGNA. However, Ms.

Atkins did not immediately switch from Partners to CIGNA,

but chose to extend her coverage under Partners and to assume

the burden of the whole monthly premium herself. E] Dorado

ceased to pay any part of Ms. Atkin’s insurance premiums.

Plaintiff began experiencing severe headaches which failed

to respond to the medication prescribed by her primary care

giver. On October 18, 1995, her physician faxed to Partners a

“Specialist Referral” form requesting approval tor radiological

diagnostic services in the form of a CT scan. The physician

indicated possible hypoglycemia as the basis of the request. On

October 20, 1995, the physician changed the basis to “severe

headaches — not responsive to meds.” Plaintiff’s Exhibit A. On

October 25, 1995, Plaintiff suffered an intracranial rupture of

an aneurysm.

In June of 1996, Plaintiff brought suit in the Arizona

Superior Court asserting that Partners’ withholding of approval

of the CT scan was a breach of contract and the proximate cause

of her injury.' She further alleged claims of negligence,

1. The Plan included coverage for “All Medically Necessary diagnostic

and therapeutic radiology services and laboratory tests provided on an

outpatient basis by Participating Providers, when provided or arranged by a

Primary Care Physicians” “Medically Necessary’ is defined in the Plan as

“[T]hose services required to identify or treat an illness that is either diagnosed

or reasonably suspected. To be Medically Necessary, a service must a. be

required to treat an illness or injury; and b. be consistent with the diagnosis

and treatment of the Member's conditions; and c. be in accordance with the

standards of good medical practice; and d. be performed at the most

appropriate level of care for the Member as determined by the Member's

medical condition and not the member's financial or family situations, or the

distance the Member lives from the hospital or any other nonmedical factor;

and e. not be for the convenience of the Member, nor the Member's family or

the Member's physician or another health care provider.”

Appendix A

negligence per se, and bad faith. On July 1, 1996, Defendant

removed the case to federal court under 28 U.S.C. § 1446,

asserting that all the claims brought by Plaintiff are governed

by § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), and

thus involve a federal question over which this Court has original

jurisdiction. Plaintiff opposes the removal and requests remand

to the state court, arguing that because she lacks standing to

bring a claim under ERISA, this Court lacks jurisdiction.

Il. JURISDICTION

The party seeking removal has the burden of establishing

federal jurisdiction. Westinghouse Electric Corp. v. Newman &

Holtzinger, 992 F.2d 932, 934 (9th Cir. 1993); Emrich v. Touche

Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988) citing Wilson

v. Republic Iron & Steel Co., 257 U.S. 92, 97 42 S. Ct. 35, 37,

66 L.Ed. 144 (1921), and the removal statute is strictly construed

against removal jurisdiction. Jd. citing Libhart v. Santa Monica

Dairy Co., 592 F.2d 1063, 1064 (9th Cir. 1979)

The general rule is that only state court actions that

originally could have been filed in federal court may be removed

by the defendant and that absent diversity of citizenship, federal

question jurisdiction is required. Caterpillar Inc. v. Williams,

482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987).

The presence or absence of federal question jurisdiction is

governed by the “well-pleaded complaint” rule which provides

that federal jurisdiction only exists when a federal question is

presented on the face of the Plaintiff’s properly pleaded

complaint. Jd.; Westinghouse at 934, citing Salveson v. Western

States Bankcard Ass'n, 731 F.2d 1423, 1426 (9th Cir. 1984).

One exception to the general “well-pleaded complaint” rule

Appendix A

is the doctrine of “complete preemption.” Stikes v. Chevron USA.

Inc., 914 F.2d 1265, 1267 (9th Cir. 1990), cert. denied 500 U.S.

917, 111 S.Ct. 2015, 114 L.Ed.2d 101 (1991). This corollary

has been applied to ERISA; the doctrine does not, however,

always justify removal. Westinghouse, 992 F.2d at 935 referring

to Caterpillar, 482 U.S. at 390, 107 S.Ct. at 2428. Furthermore,

“a case may not be removed to federal court on the basis of a

federal defense, including the defense of pre-emption, even if

the defense is anticipated in the plaintiffs complaint and even if

both parties concede that the federal defense is the only question

truly at issue.” Caterpillar, 482 U.S. at 393, 107 S.Ct. at 2430.

Ill. ERISA

Congress enacted ERISA in 1974 to protect the right of

participants in private pension plans to a stable and secure source

of retirement income, but that statute has frequently had the

opposite effect of depriving employees of rights they had under

state law without providing a corresponding federal remedy.

Olson v. General Dynamics Corp., 960 F.2d 1418, 1423 (9th

Cir. 1991) (concurring opinion of Judge Reinhardt). The federal

courts have routinely found state tort and implied contract

remedies preempted by § 514(a) even when ERISA provides no

substitute for the state cause of action. Jd. at 1424.

Section 514(a) of ERISA provides that the Act “shall

supersede any and all State laws insofar as they may now or

hereafter relate to any employee benefit plan.” 29 U.S.C.

§ 1144(a). Section 514(c)(1) indicates the preemption provision

extends to all state common law causes of action which relate

to benefit plans. The Supreme Court has described this clause

as “deliberately expansive.” Pilot Life Insurance Co. v. Dedeaux,

481 U.S. 41, 46, 107 S.Ct. 1549, 1552, L.Ed.2d 39 (1987).

Appendix A

The Ninth Circuit has noted that “the great majority of cases

in which this Court and the Supreme Court have held that ERiSA

preempts state common law claims have involved situations

where the plaintiff alleged that-plan administrators were not

providing benefits in accordance with the terms of the plan.”

Olson, 960 F.2d at 1422. The Circuit has also written:

“Notwithstanding the remarkable legerdemain that has turned a

statue designed to protect employee pension rights into a law

that strips them of most of the protection they previously enjoyed

under state law, there are limits to the unusually broad

preemptive sweep we have afforded ERISA . . . [T]he Act does

not preempt the state-law claims of plaintiffs who are without

standing to challenge ERISA violations.” Concha v. London, 62

F.3d 1493 (9th Cir. 1995).

Defendant states that Plaintiff has asserted a claim for

improperly withheld benefits under an ERISA plan, and thus is

subject to the Act. Defendant’s Response to Motion for Remand

at 2. Plaintiff’s reply is that Ms. Atkins ceased to be subject to

ERISA, which covers employer-plans, once she was no longer

an employee of El Dorado. Defendant’s Objection to Removal

and Motion for Remand at 7, 8. As a non-participant, Plaintiff

asserts, she lacks standing to bring any claim under ERISA and

this Court lacks the subject matter jurisdiction to hear such a

claim.

A. PARTICIPANTS UNDER ERISA

ERISA carefully enumerates the parties entitled to seek

relief under its enforcement provisions; only participants,

beneficiaries, fiduciaries, or the Secretary of Labor may bring a

claim in federal court. Franchise Tax Board v. Construction

Laborers Vacation Trust, 463 U.S. 1, 27, 103 S.Ct. 2841, 2855,

Appendix A

77 L.Ed.2d 420 (1983); Cripps v. Life Ins. Co. of North America,

980 F.9d 1261, 1265 (9th Cir. 1992).

Defendant claims that Ms. Atkins qualifies as a “participant”

under the Act. In ERISA’s terms, a “participant” is defined as:

“[A]ny employee or former employee of an

employer, or any member or former member

of an employee organization, who is or may

become eligible to receive a benefit of any

type from an employee benefit plan which

covers employees of such employer or

members of such organization, or whose

beneficiaries may be eligible to receive any

benefit.”

29 U.S.C. § 1002(7). The Ninth Circuit has held that whether a

person is a plan participant is to be determined as of the time of

the filing of the lawsuit. Harris v. Provident Life and Acc. Ins.

Co., 26 F.3d 930 (9th Cir. 1994) citing Olson at 1422. In the

instant case, Ms. Atkins’ claim was filed long after she had left

her employment at E] Dorado and long after her employer had

ceased contributing payments toward her Partners insurance

premiums. This is persuasive evidence that the Plaintiff was not

an ERISA “participant.”

B. RETURN TO EMPLOYMENT AND VESTED

INTERESTS

Defendant argues that Plaintiff is, nevertheless, a

“participant” because the Supreme Court has read the definition

of “participant” to include former employees who have a

reasonable expectation of returning to covered employment or

Appendix A

have a colorable claim to vested benefits. Firestone Tire and

Rubber Co. v. Burch, 489 U.S. 101, 117, 109 S.Ct. 948, 958,

103 L.Ed.2d 80 (1989) quoting Kuntz v. Reese, 785 F.2d 1410,

1411 (9th Cir. 1986) (per curiam), cert. denied, 479 U.S. 916,

107 S.Ct. 318, 93 L.Ed. 2d 291 (1986). Conversely, the Supreme

Court noted that “[A] former employee who has neither a

reasonable expectation of returning to covered employment nor

a colorable claim to vested benefits, however, simply does not

fit within the phrase ‘may become eligible.” Jd. quoting Saladino

v. 1.L.G.W.U. National Retirement Fund, 754 F.2d 473, 476 (2d

Cir. 1985). Accordingly. Defendant bears the burden of

demonstrating that Ms. Atkins was a “participant” under the

reading of the term in Firestone.

Defendant does not argue that Ms. Atkins planned or plans

to return to work at El Dorado. Instead, Defendant argues that

Ms. Atkins obtained her HMO membership through her

employment at El Dorado, and that her claim is nothing more

than a coverage dispute for “vested” benefits which she sought

pursuant to an ERISA plan. “Thus, the undeniable truth of the

matter is that she made a claim for a benefit under an ERISA

plan while she was a member and while she was entitled to

receive medical benefits from that HMO plan.” Defendant’s

Response to Plaintiffs Motion for Remand at 4.

Defendant further argues: “In this case, the plaintiff doesn’t

just have a ‘colorable claim,’ she has an actual claim to a benefit

under the insurance coverage which was originally provided to

her through her employment at E] Dorado Medical Center. The

mere fact that she subsequently left that employment or that

she decided to terminate her insurance coverage before filing

her complaint in the Pima County Superior Court has no bearing

upon her status as a plan ‘participant’ . . . Nothing which Plaintiff

Appendix A

has cited to this Court should leave (sic) this Court to conclude

that Plaintiff’s decision to keep her HMO coverage after leaving

E] Dorado Medical Center somehow ‘transformed’ this plan from

an ERISA to a non-ERISA plan.” Jd. at 5.

It is not entirely clear whether Defendant argues that the

vested benefit Plaintiff enjoyed was the initial acquisition of

the HMO plan through El Dorado Hospital or the option to keep

the HMO plan following her employment. Neither

characterization is supported by ERISA’s legislative history or

by existing Ninth Circuit case law. At the time the original Act

was passed. Congress described the concept of “vesting” thus:

“One of the major private pension plan

considerations centers around the concept of

vesting. Vesting refers to the nonforfeitable

right of interest which an employee

participant acquires in the pension fund. The

benefit credits may vest in the employee

immediately, although in most cases

participants do not become eligible for

vesting of benefits until a stipulated age or

period of service or a combination of both.

is attained. Upon compliance with the basic

requirements of age or service, many plans

will grant their participants vested rights to

those benefits earned to that time. However,

should employment terminate prior to such

time, the employee will receive no benefits.”

_H.R.Rep. No. 533, 93d Cong., 2d Sess., reprinted in 1974

U.S.Code Cong. & Admin.News 4639, 4644-45. Defendant, who

bears the burden of establishing federal jurisdiction, has cited

Appendix A

no persuasive authority in support of his argument that an ERISA

health insurance plan initially obtained through an employer

but subsequently preserved by a departing employee entirely at

her own cost and in her own name, is a “vested benefit” of the

past employment.”

ERISA was principally created to protect the rights held by

current employees with benefits and retirees whose benefits in

the forms of pensions and insurance policies have vested.’ Thus,

the Act focuses on existing relationships between an employee

and an employer,‘ be that through a pension plan the employee

2. Defendant’s argued definition may be compared to examples of what

case law has held a vested benefit to be. For example, in Mitchell v. Mobil Oil

Corp., 896 F.2d at 474, the Plaintiff had received all of his vested pension

benefits in a lump sum, and so had received the full extent of his benefits and

was no longer eligible to receive future payments. In Olson v. General

Dynamics, the court wrote “At the time he filed this suit, Olson was receiving

benefits from all three companies. Olson was therefore a ‘participant’ in each

company’s employee benefit plan ...” Jd. at 1422. These treatments of the

term “vested” do not tend to support Defendant's definition.

3. S.Rep. No. 127, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code

Cong. & Admin. News 4639. H.R.Rep. No. 533, 93d Cong., 2d Sess., reprinted

in 1974 U.S.Code Cong. & Admin. News 4639. “The primary purpose of the

bill is the protection of individual pension rights, but the committee is

constrained to recognize the voluntary nature of private retirement plans.”

House Report at 4639.

4. Congress was particularly concerned with the perceived inequitable

treatment of employees who had relied on their employers’ guarantees of

certain benefits. “In almost every instance, participants lose their benefits

not because of some violation of federal law, but rather because of the manner

in which the plan is executed with respect to its contractual requirements of

vesting or funding . . . Thus, under present law, accumulated pension credits

(Cont'd)

10a

Appendix A

receives on retirement or an insurance premium that is paid for

him during employment; whether or not the employee is actively

working for the employer is not especially relevant. See

Memorial Hospital System v. Northbrook Life Ins. Co., 904 F.2d

236, 245 (Sth Cir. 1990) (preemption exists where a claim affects

the relationship among the traditional ERISA entities: the

employer, the plan, and its fiduciaries and the participants and

beneficiaries); Hook v. Morrison Milling Co., 38 F.3d 776, 781

(Sth Cir. 1994); Weaver v. Employers Underwriters, Inc., 13 F.3d

172, 176-77 (Sth Cir. 1994) (state-law claim by contractor did

not affect relationship between traditional ERISA entities).

ERISA was not created to regulate the relationship between an

individual subscriber to a health plan outside of the employer-

employee relationship.°

Ninth Circuit law holds that non-employees, without

existing ties to a former employer’s ERISA plan, lack standing

to sue under ERISA. In The Meadows v. Employers Health

Insurance, 47 F.3d 1006 (9th Cir. 1995), the Ninth Circuit held

that federal jurisdiction did not exist “because neither the

Meadows nor the Friedels had any existing ties to the ERISA

plan in 1990. Mr. Friedel terminated his employment with School

Services on December 29, 1989.” Jd. at 1009; see also Harris v.

Provident Life, 26 F.3d 930 (9th Cir. 1994).

Plaintiff argues that she similarly lacked any tie to her

(Cont'd)

can be lost even when separated employees are within a few months, or even

days, of qualifying for retirement. The proposed bill would, therefore,

establish minimum standards of vesting, funding, and fiduciary and a system

of compulsory benefit insurance to protect the security of pension rights.”

House Report at 4643.

5. Congressional Reports, supra.

lla

Appendix A

former employer’s ERISA plan. She argues that her right to have

a CT scan performed existed due to her own payment of

insurance premiums under an individual contract with Partners

and the fact that she initially purchased that insurance through

El Dorado was simply fortuitous. Objection to Removal and

Motion for Remand at 7, 8, 10; Plaintiff’s Reply to Defendant’s

Response at 2, 7. This severance of E] Dorado’s participation in

Ms. Atkin’s health insurance through Partners. in light of the

legislative goals of ERISA and the Ninth Circuit’s case law,

persuades this Court that Plaintiff had no “vested interest” as

contemplated by ERISA, and therefore her state-law claims do

not relate to an ERISA plan.

C. CLAIMANT SEEKS DAMAGES

While Defendant casts Plaintiffs claim as one for vested

benefits, Plaintiff emphasizes that she seeks damages. The Ninth

Circuit has stated “[c]laimants who seek a damage award rather

than vested benefits improperly withheld, lack standing to bring

suit under ERISA.” Nunez v. Monterey Peninsula Engineering,

et al., 867 F.Supp 895, 901 (N.D.Cal. 1994) citing Mitchell, 896

F.2d at 474. On the face of Plaintiffs complaint, there is no

indication that she seeks a medical benefit wrongfully denied

her. Instead, she asserts claims of negligence, breach of contract,

and bad faith, and prays for judgment in an amount deemed just

and reasonable by the court and for attorneys fees. Thus, under

Nunez, Plaintiff lacks standing to bring her claim for damages

under ERISA.

IV. CONCLUSION

The Ninth Circuit has observed that “[dJespite the breadth

of ERISA’s preemption provision, the Supreme Court has held

12a

Appendix A

that not all state law claims are preempted.” The Meadows at

1009 citing Mackey v. Lanier Collection Agency & Service, Inc.,

486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 2836 (1988) and

quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103

S.Ct. 2890, 2899-9900, 77 L.Ed.2d 490 (1983) (“some state

actions may effect employee benefit plans in too tenuous,

remote, or peripheral a manner to warrant a finding that the law

‘relates to’ the plan”). In this case, Plaintiffs damages action

brought against the health insurance plan which she opted to

keep, entirely at her own expense, after ending her relationship

with her employer, is such a tenuous, remote, and peripheral

consequence of her employment, that the goals of ERISA are

not furthered by ERISA preemption. Defendant has not

discharged his burden of establishing federal jurisdiction with

persuasive argument or authority.

Because Defendant has not demonstrated that federal

question jurisdiction exists, the question of federal jurisdiction

is governed by the well-pleaded complaint rule. Under that test,

this Court finds that Plaintiff has not pleaded a federal claim.

There being no ERISA, general federal question, or diversity

basis for jurisdiction, it is hereby ORDERED that this case be

REMANDED to the Superior Court of the State of Arizona, In

and For the County of Pima.

DATED this 5th day of December, 1996.

s/ Frank R. Zapata

FRANK R. ZAPATA

United States District Judge

13a

APPENDIX B — ORDER OF THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED MARCH 27, 1997

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 97-15169

DC# CV 96-443-FRZ

Arizona (Tucson)

JOY D. ATKINS, a single person,

Plaintiff-Appellee,

VS.

HEALTHPARTNERS OF SOUTHERN ARIZONA, d/b/a

PARTNERS HEALTH PLAN OF ARIZONA, INC.,

Defendant-Appellant.

ORDER

Before: SNEED, FARRIS and THOMAS, Circuit Judges

Appellee’s motion to dismiss this appeal for lack of

jurisdiction is granted. See 28 U.S.C. § 1447; Executive Software

v. U.S. District Court, 24 F.3d 1545, 1549 (9th Cir. 1994).

Appellant’s petition for writ of mandamus is denied.

A certified copy of this order sent to the district court shall

constitute the mandate.

l4a

Appendix B

[stamp]

A TRUE COPY

CATHY A. CATTERSON

Clerk of Court

ATTEST

MAR 27 1997

by: s/ illegible

Deputy Clerk

OPPOSITION

{

- . ays? i, <i . —_— 4

wibeaitiee ears ty aiewasemein ss Gob 5 SASL PS

' — ey We

FILED

— JUL 14 1997

YQ CLERK

No. 96-2051

In The

Supreme Court of the United States

October Term, 1996

HEALTHPARTNERS OF SOUTHERN ARIZONA d/b/a

PARTNERS HEALTH PLAN OF ARIZONA, INC.,

Petitioner,

vs.

JOY ATKINS,

Respondent.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

A BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

Gary S. GRYNKEWICH

WHurTewiLL, Linpen, GrYNKEWICH & HA .tapay, P.C.

5210 E. Williams Circle

Suite 500

Tucson, Arizona 85711

(520) 745-8000

Attorneys for Respondent

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

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

1. Does a former employee, who has no reasonable

prospect of re-employment and no colorable claim to

benefits under an ERISA or COBRA plan have standing

to pursue a claim as a “participant” under the clear

meaning of 29 U.S.C. § 1002(7) and as that statute has

been appropriately interpreted by this Court in its deci-

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

103 L.Ed. 2d 80, 109 S.Ct. 948 (1989)?

2. Under the clear language of 28 U.S.C. § 1447(d),

is appellate review of a district court’s order of remand

appropriate where the sole basis of the order of remand is

a lack of subject matter jurisdiction?

PARTIES TO THE PROCEEDING

The Petition accurately lists the parties to the pro-

ceeding, and the Rule 29.6 listing contained in the Peti-

tion is accurate.

iii

TABLE OF CONTENTS

Page

I ee i

eg ii

II a Si. ies lS. ek... iii

ER iis oss ide shns wae nabicn vsé<aee ou o« Vv

i tihache oa ss an nas cape ses cbaud cide 1

pememmnamet GF Furiodiction. ......... 2.0... ccc ccccucse 1

Statutory Provisions Involved...................... 2

ne 3

odo ok 5 cic nnn 65 6s dane dd-e an’ 3

oe 3

C. District Court Proceedings............... 6

D. Appeal to the Ninth Circuit ............. 7

Reasons for Granting the Writ..................... 7

I. A Former Employee Who Has No Reasonable

Expectation Of Returning To Covered Employ-

ment And Who Has No Colorable Claim For

Benefits Under An Erisa Plan Has No Standing

To Pursue A Claim Under Erisa And Is Free To

Pursue State Court Claims................... 11

A. Introduction - Public Policy ............. 11

ES a ae a 13

C. <The. Firestone Decision :.................. 14

SE ee 15

E. Atkins’ “Colorable” Claim............... 17

F. The “But For” Line of ee 19

TABLE OF CONTENTS - Continued |

G. Benefits vs. Damages................20+ 20

II. Under The Clear Language Of 28 U.S.C.

§ 1447(d), Appellate Review Of A District Court's

Order Of Remand Is Inappropriate Where Th

Sole Basis For Such Order Of Remand Is Lack Of

Subject Matter Jurisdiction .................... 23

COIN 5 cas vs K weber s CEN eile waco wns bdo eta 28

— — "

TABLE OF CITATIONS

Page

Cases Crrep:

Arizona Carpenters Pension Trust Fund v. Citibank,

Ea 22

Christopher v. Mobile Oil Corp., 950 F.2d 1209 (5th

CR Sal a. wadebinn sts amettcshiitcmeies batadadbadss 19

Clorox Company v. United States District Court, 779

ie ae OO ey iS ew piv nnndenacviveveies 24, 25

Concha v. London, 62 F.3d 1493 (9th Cir. 1995) ........ 4

Crawford v. Lamantia, 34 F.3d 28 (1st Cir. 1994)...... 13

Executive Software v. U.S. District Court, 24 F.3d

Sy UE Ms BOS ov b's ccc hagnsvaken dsc 6, 24, 27, 28

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103

L.Ed. 2d 80, 109 S.Ct. 948 (1989) ... 6, 11, 12, 14, 15, 23

Harris v. Provident Life and Acc. Ins. Co., 26 F.3d 930

SPUN SM Mao os ps acti sicdcocsads tak 13, 15, 16

Kunzi v. Pan American World Airways, Inc., 833 F.2d

Se PE obs Ganksaschakvas deekcnactes 27

Marshal! v. Bankers Life and Casualty Company, 2

Cal 4th 1045, 10 Cal. Rept. 2d 72, 832 P.2d 573

GR Aces oescs cacaccaete aa + 0499 9 Ras Uw gh dis\sie 9

Moses H. Cone Memorial Hospital v. Mercury Constr.

Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed. 2d 765

ee AES EAI OS IIN ORE Be oS 24

New Orleans Public Service v. Majoue, 802 F.2d 166

a OR... SRA ee pean pSoga iri ae 26

Olson v. General Dynamics Corp., 960 F.2d 1418 (9th

eee Pee PLEA PETTY ETTE TET ee ee Ee ee 13

TABLE OF CITATIONS - Continued

Page

Panaras v. Liquid Carbonic Industries Corporation, 74

om, ae, fee. | Ae rere 17, 18

Pelleport Investors, Inc. v. Budco Quality Theaters,

Snc., 741 F.26 273 (GG) Cig. TEBE). 23.06 cas ccccsnces 25

Quackenbush v. Allstate Insurance Company, __ U.S.

ee ee St eee 10, 23, 24

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct.

SOPG, TF LG. BB. ABD. (IBRD) an.» os wap sencincescgecse 22

Sommers Drug Stores Co. Employee Profit Sharing

Trust v. Corrigan, 83 F.2d 345 (5th Cir. 1989) ...... 21

Survival Systems v. United States District Court, 825

Pe DO GPW GRE BOOP Pa caecciscentssesces 25, 26, 27

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

RS oinksks ss vanes acura sac ecddeeanenbeabs 23

Vartanian v. Monsanto Co., 14 F.3d 697 (list Cir.

Pete cdnce \rukiv cages 40d ca seackeuanwues 19, 20

Statutes CITED:

| I rrr ee ct Segre 1

ee Ps BPG hc ince nccicccccvdacdsnesaedasvnes 2

y Bitte PPT 1, 2, 10, 23, 24, 26, 28

eS ee eee er ee 3

BP USAC Te cea ahs a is BRM. BOG 6, 8, 13, 28

ee ee Wee Oe IN dha 5 oc cadens sandeavnwiasbabs 2

oe Be err ry rere es oe 2

A BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

Respondent, Joy Atkins (“Atkins”), opposes Peti-

tioner’s, Healthpartners of Southern Arizona, d/b/a

Partners Health Plan of Arizona, Inc. (“Partners”) peti-

tion for a Writ of Certiorari to review the judgment of the

United States Circuit Court of Appeals for the Ninth

Circuit.

OPINIONS BELOW

Partners has included the decision of the United

States District Court for the District of Arizona and the

unpublished Order from the Ninth Circuit Court of

Appeals in its Appendix.

However, Partners has failed to mention that it has

filed a Motion for Reconsideration under Rules 59 and 60

of the Federal Rules of Civil Procedure with the District

Court and, as of the time of this writing, the District

Court has not disposed of that Motion.

STATEMENT OF JURISDICTION

This Court, for reasons which will be discussed at

more length infra, should not and cannot exercise juris-

diction to review this matter pursuant to 28 U.S.C.

§ 1254(1) in that said provision is superseded by the clear

language of 28 U.S.C. § 1447(d) which prohibits appellate

review in any form of remand orders based upon a dis-

trict court’s finding of lack of subject matter jurisdiction.

STATUTORY PROVISIONS INVOLVED

The relationship between ERISA removal (29 U.S.C.

§§ 1132 and 1144) and COBRA (29 U.S.C. § 1161 et seq.) is

of no consequence to this proceeding. For purposes of

this proceeding, Atkins concedes that were she a partici-

pant in a converted plan at the time this litigation was

initiated, ERISA removal would have been appropriate.

Thus, Partners’ reference to 29 U.S.C. § 1161 is surplusage

and may be ignored.

Partners has clearly omitted two very relevant statu-

tory provisions which relate to this Court's jurisdiction to

review the District Court’s Order of Remand.

28 U.S.C. § 1447(c) provides, as follows:

A motion to remand the case on the basis of any

defect in the removal procedure must be made

within 30 days after the filing of the notice of

removal under section 1446(a)[28 U.S.C.

§ 1446(a)]. If at any time before final judgment it

appears that the district court lacks subject mat-

ter jurisdiction, the case shall be remanded. An

order remanding the case may require payment

of just costs and any actual expenses, including

attorney fees, incurred as a result of the

removal. A certified copy of the order of remand

shall be mailed by the clerk to the clerk of the

State court. The State court may thereupon pro-

ceed with such case.

28 U.S.C. 1447(d) provides, as follows:

An order remanding a case to the State court

from which it was removed is not reviewable on

appeal or otherwise, except that an order

remanding a case to the State court from which

it was removed pursuant to section 1443 of this

title shall be reviewable by appeal or otherwise.

Otherwise, Partners recitation of statutory provisions

is acceptable to Atkins.

STATEMENT OF THE CASE

A. Introduction

This action involves the question of whether a person

who brings a claim for damages constitutes a “partici-

pant” under an employee benefit plan as defined by the

provisions of the Employee Retirement Income Security

Act of 1974, 29 U.S.C. §§ 1001 et seq. (“ERISA”) when that

person is a former employee with no reasonable expecta-

tion of re-employment and no colorable claim to benefits

under the plan at the time of bringing suit.

Also, this Court must examine whether it has juris-

diction to consider a petition for writ of certiorari where

the district court’s order of remand is based solely on its

determination that it lacks subject matter jurisdiction to

resolve the claim.

B. Factual Summary

Respondent, Joy D. Atkins (“Atkins”) was at one time

an employee of El Dorado Hospital and Medical Center

in Tucson, Arizona. While employed there, Atkins was

provided insurance as a benefit of her employment under

a HMO plan offered by Petitioner (hereinafter “Partners”)

through her employer. El Dorado paid a portion of

re ae

Atkins’ premium for this insurance while she was

employed there.

On August 25, 1995, Atkins terminated her employ-

ment with El Dorado and went to work for another

company. Atkins’ new employer offered its employees

health care coverage benefits under a different HMO

plan, CIGNA. Upon her re-employment, Atkins did not

immediately enroll in the CIGNA plan, because she was

not immediately eligible for coverage under that plan.

Instead, to avoid a gap in coverage, she continued her

health insurance coverage for a short period of time

under Partners as allowed and required by COBRA. |

While still entitled to benefits under Partners’ cover-

age, Atkins began experiencing severe headaches which

did not respond to the medication prescribed by her

primary care provider (“PCP”). On October 18, 1995,

because of these unremitting headaches, Atkins’ PCP

faxed a “Specialist Referral” form to Partners requesting

approval for radiological diagnostic services in the form

of a CT scan. In this request, the PCP erroneously indi-

cated “possible hypoglycemia” as the basis for the

request. On October 20, 1995, realizing the error in her

provisional diagnosis, the PCP changed the diagnosis to

“severe headaches — not responsive to meds.” On October

25, 1995, Atkins suffered an intra-cranial rupture of an

aneurysm, which has rendered her completely and per-

manently disabled.

After the intra-cranial event, and substantially prior

to filing suit in this case, Atkins dropped her coverage

with Partners and, having achieved eligibility through

———EEE———

her new employer, obtained health insurance coverage

through CIGNA.

The action giving rise to this proceeding was filed on

Atkins’ behalf in the Arizona Superior Court in June 1996

claiming damages for pain and suffering, emotional dis-

tress, loss of the enjoyment of life, lost earning capacity,

and post-Partners’-coverage medical expenses.! The theo-

ries underlying that action were negligence, breach of

contract, negligence per se, and bad faith. Nowhere under

any conceivable reading of her pleadings has Atkins

alleged that, at the time of filing her suit, she had a

continued or colorable right to have a diagnostic CT scan

performed, or that she was entitled to be reimbursed the

cost of such a procedure (which she never paid) as a

benefit under the Partners’ plan. In other words, Atkins

never claimed she had any colorable claim to benefits -

arising either out of ERISA or COBRA - under Partners’

plan at the time of filing her suit. Instead, her action has

sounded and still sounds solely for damages. Addi-

tionally, Partners has never claimed - up until this Peti-

tion was filed — that Atkins remains or ever was entitled

to the diagnostic CT scan or had any colorable claim to

having it performed at the time Atkins filed suit.

Partners removed this action to the federal district

court. Atkins objected to the removal and moved for

? Atkins does not claim Partners failed to pay any medical

expense which she actually incurred prior to termination of her

coverage by Partners. All medical expenses claimed in her

lawsuit relate to thos- incurred as a result of the ruptured

aneurysm post termination of coverage.

remand. The district judge granted the remand and deter-

mined that the federal court did not have subject matter

jurisdiction over the case. [Appendix A to Partner’s Peti-

tion}

Partners then sought review in the Ninth Circuit

Court of Appeals via both direct appeal and mandamus.

The Ninth Circuit refused to review based on its holding

in Executive Software v. U.S. District Court, 24 F.3d 1545,

1549 (9th Cir. 1994). [Appendix B to Partners’ Petition]

Partners now petitions this Court for a Writ of Cer-

tiorari.

C. District Court Proceedings

While Atkins has sufficiently summarized the district

court proceedings above, candor requires that comment

be made on Partners’ statement that “[T]he heart of

[Atkins’] argument was that, because she exercised

COBRA rights, she was not subject to ERISA.” It is con-

ceded that argument was made. It did not, nor does it, lie

at the heart of Atkins’ argument. Given the clear statu-

tory definition [29 U.S.C. § 1002(7)] of who — for standing

purposes — constitutes a participant under an ERISA plan,

as has been succinctly and clearly interpreted by this

Court in Firestone Tire and Rubber Company v. Bruch, 409

U.S. 101, 103 L.Ed. 2d 80, 109 S.Ct. 948 (1989), the “ERISA

vs. COBRA issue” is a non-issue. Any suggestion by

Partners that this Court should dwell on that question is

nothing more than a diversionary tactic.

The sole issue — apart from the jurisdictional question

- dispositive of Partners’ Petition has to do with whether

or not Atkins had standing to bring an action as a “partic-

ipant” under an ERISA plan at the time she filed suit in

June 1996. Indeed, in her Objection to Removal and

Motion for Remand, Atkins specifically averred that

‘[p]rior to the initiation of this litigation, Plaintiff termi-

nated her coverage with Defendant and was entitled to

no benefits under Defendant’s insurance policy

[emphasis added].” Until its bald assertion,2 which is

completely devoid of factual basis or authority, in this

Court that Atkins had or made a colorable claim for

benefits at the time this litigation was brought, Partners

has never disputed that statement.

D. Appeal to the Ninth Circuit

Partners’ statement of what occurred on appeal to the

Ninth Circuit is a fair summary of those proceedings.

REASONS FOR DENYING THE WRIT

it is indisputable that millions of Americans are cov-

ered under policies of health insurance governed by

ERISA. And, many of those millions convert their bene-

fits under COBRA. However, whether or not a COBRA

converted policy céntinues to be controlled by ERISA is

2 See, page 23 of Partners’ Petition wherein it mis-

represents:

“In the case at bar, Respondent's claim is clearly

not one for ‘damages’ . . . which she has already

acknowledged . . . [emphasis in original)”

immaterial to the issues involved in this litigation. Irre-

spective of any involvement with COBRA, at the time the

instant litigation was commenced, Atkins was a former

employee of the employer through whom the Partners

plan was obtained with no reasonable expectation of

returning to covered employment and no colorable claim

to benefits under the plan through either ERISA or

COBRA. As such, she lacked standing to bring an action

under ERISA.

Contrary to Partners’ protestation that there is clear

error arising out of the lower courts’ decisions on the

issue of standing, the decisions of those courts are on all

fours with the unambiguous language set forth in 29

U.S.C. § 1002(7); the likewise pellucid reasoning of this

tribunal in Firestone, supra; and each and every one of the

decisions referred to in footnotes 3 and 4 of Partners’

Petition. It is not Atkins who distorts or expands any

concepts discussed by the statute or any decisional inter-

pretations through the ploy of “semantics”. Rather, it is

Partners who urges a gross and mutated definition of the

term “participant” to suit its needs — not society’s — in an

attempt to create for Atkins a fabricated, unfounded

standing under ERISA.

The argument that ERISA can be avoided by a former

employee’s “simply terminating her health benefit cover-

age” is akin to arguing that Atkins planned to have the

3 Partners, without any attempt at analysis vis-a-vis the

question before this Court, refers to numerous cases which

discuss the standing issue. None of these cases addresses the

real issue before this Court in any meaningful fashion, nor does

Partners develop such a meaningful relationship.

stroke giving rise to this action and which has perma-

nently disabled her.* In the vast majority of instances, a

decision to forego future health insurance coverage by

one with a permanent major debilitating affliction in

order to pursue litigation would be anything but the

“simple” process Partners describes.

What Partners is asking this Court to do is to expand

upon the “remarkable legerdemain that has turned a

statute designed to protect employees’ pension rights into

a law that strips them of most of the protection they

previously enjoyed under state law,” Concha v. London, 62

F.3d 1493, 1505 (9th Cir. 1995), by rewriting the statute

conferring standing and convoluting its own and the

various circuit courts’ decisional law on that issue. The

only societal goal which would be advanced by granting

the relief sought by Partners would be to cast in bronze

the maxim that “the insurer [always] wins and the

insureds lose.” Marshall v. Bankers Life and Casualty Com-

pany, 2 Cal 4th 1045, 10 Cal. Rept. 2d 72, 832 P.2d 573, 585

(1992). To arrive at such a result, this Court would not

have to clarify its and the circuits’ earlier decisions, but

would have to engage in verbal gymnastics and factual

distortion. Verbal fantasy would need become legal real-

ity. Society would not benefit. Partners would. It is,

indeed, ironic that Partners would choose to use the

words “fair . . . treatment” in the same sentence® as one of

its goals in bringing this Petition. It seeks a resolution

* The rupture of an intra-cranial aneurysm has similar

results for the victim as those associated with a stroke.

5 See, page 11 (last line) of Partners’ Petition.

which would provide anything but fair treatment. Part-

ners seeks favored treatment for the purposes of its own

profit. Absolute absolution from “fair treatment” and

unfettered freedom from responsibility for any devasta-

tion caused by its malfeasance lie at the heart of Partners’

Petition for relief. ERISA provides no such relief. Nor,

should this Court impute such a goal as being in keeping

with its clear intent.

Finally, the entire basis of the District Court’s Order

remanding this case to the Arizona State Court had to do

with its determination that it lacked subject matter juris-

diction over this action. While Partners argues that there

are findings of fact and law collateral to the jurisdictional

question at the heart of the District Court’s Order, there is

no support for such an argument. Should this Court grant

the relief Partners requests, it will, in essence, be voiding

28 U.S.C. § 1447(d). Such a result would not be beneficial

to the orderly administration of justice. Indeed, while

Atkins is fully aware that this Court recently liberalized

appellate intervention in certain limited instances when

remand has been ordered, Quackenbush v. Allstate Insur-

ance Company, ___ U.S. __, 116 S.Ct. 1712 (1996), it did

not go so far as to hold that § 1447(d) is nugatory and

should be ignored. Nor, should it so have held.

Removal, in and of itself, delays litigation on the

merits. Carte blanche right to appeal from an order of

remand in all circumstances - apart from adding to the

already overwhelming and burgeoning caseloads in this

Court and the circuit courts of appeal — plays squarely

into the hands of those who seek resolution through

delay and obfuscation rather than on the merits. Absent

a clear showing that a district court’s remand order is

based on something wholly collateral to the issue of

subject matter jurisdiction, this Court should not open the

floodgates by allowing intermediate appeals from all

remand orders.

As such, the Writ should be denied.

ZL.

A FORMER EMPLOYEE WHO HAS NO REASONABLE

EXPECTATION OF RETURNING TO COVERED

EMPLOYMENT AND WHO HAS NO COLORABLE

CLAIM FOR BENEFITS UNDER AN ERISA PLAN HAS

NO STANDING TO PURSUE A CLAIM UNDER ERISA

AND IS FREE TO PURSUE STATE COURT CLAIMS.

A. Introduction - Public Policy

Public policy dictates that the statutory and deci-

sional law of the bodies who govern our nation be inter-

preted in accordance with the clear meaning of the

language employed by the entity either creating or inter-

preting the law. Otherwise, like it or not, the law of the

land becomes meaningless. Congress clearly set forth

who has standing to pursue a claim under ERISA. In

Firestone, supra, this Court clearly analyzed and inter-

preted what the legislature enacted. Various circuit courts

of appeal have discussed the issue of standing.

® Notwithstanding the vigor of Partners’ protestations

regarding the purported societal benefits to be reaped by

granting the relief sought in its Petition, Atkins has a quite

founded reason to believe that delay is a substantial factor

giving rise to the filing of Partners’ Petition.

iia inital

Now, Partners would set the language employed by

Congress, this Court and the various circuit courts on its

ear invoking a claim of “public policy” as a thinly

masked disguise for its own naked self-interest. Indeed,

notwithstanding Partners’ unfounded allegations to the

contrary, it is not Atkins who seeks to do violence to the

holding in Firestone, it is Partners. This Court should not

be deceived.

There is no decision of any Court which supports the

following statement from Partners’ Petition:

The circuits have created two categories of

former employee claimants: (1) those who claim

benefits from the period of time while they were

covered under the plan; these claimants may sue

under ERISA; and (2) those who were never

enrolled in the plan or who have already

received all of the benefits to which they were

entitled under the plan; these claimants may not

sue under ERISA. [Emphasis added]

While this proclamation may reflect what Partners would

have liked the courts to have said, no court has made

such a statement. Indeed, if this were the state of the law,

one would presume Partners could cite a single decision

which would in essence have to hold that if a former

employee was denied a benefit at some point, and even

though that benefit is now absolutely worthless and its

being conferred would serve no purpose whatsoever,

the former employee has standing to bring a lawsuit in

federal court under ERISA. No court has fallen for that

particular legerdemain, and, unless ERISA was enacted

for the purpose of pretending to create various rights

which in substance do not exist, should any tribunal be so

duped.

B. The Statute

While Partners has quoted 29 U.S.C. § 1002(7) in its

Petition, it has not provided a word of analysis regarding

the words employed in this section by Congress as it

relates to a “former employee” who may constitute a

“participant” for purposes of standing to pursue a claim |

under ERISA.

First, it must be pointed out that a determination of

participant status is made at the time of filing suit. Harris

v. Provident Life and Acc. Ins. Co., 26 F.3d 930, 933 (9th Cir.

1994); Olson v. General Dynamics Corp., 960 F.2d 1418, 1422

(9th Cir. 1991). Partners does not dispute this concept

and, indeed, agrees that the time of filing suit initially

controls in determining standing’ as a participant under

an ERISA plan. See, Partners’ Petition, pg. 18, Section LE.

Thus, according to the clear terms of § 1002(7) in

order to be a “participant”, a former employee must be -

in the context of this case - someone “who is or may

become eligible to receive a benefit of any type from an

employee benefit plan [emphasis added .. . }” at the time

suit is filed. The words selected by our Congress speak in

7 It is undisputed that one who has standing at the

beginning of a lawsuit can lose that standing as the action

proceeds, Crawford v. Lamantia, 34 F.3d 28, 32 (1st Cir. 1994), as

Partners has pointed out. What that has to do with the issue

before the Court is somewhat perplexing since Atkins has not

had standing from the outset in this action.

the present and future tenses. They say nothing with

regard to the past.

Were it the Congressional intent, as Partners argues,

to include persons such as Atkins as “participants” in an

ERISA plan, it would have been a quite simple matter to

include any number of simple everyday English words to

accomplish that purpose: “was”, “has been”, “may have

been in the past”, etc. Those words are not included in

the definition.

Congress created ERISA. It created the definitions

which apply to the act. It is not the province of this Court

(or any other) to second guess what the legislature has

clearly enunciated and rewrite the statute. To accept Part-

ners’ theory and grant the Petition, this Court would

have to find the Congress intended to include past tense

language but forgot to do it. It is doubtful there is any

case out of any court which considers that proper statu-

tory construc‘ion.

Cc. The Firestone Decision

Not only does Partners have the audacity to imply

Congress did not mean what it clearly said, it propounds

that this Court lacked an understanding of its own words.

In order :o establish that he “may become eligi-

ble for benefits,” a claimant must have a color-

able clain that (1) he will prevail in a suit for

benefits, or that (2) eligibility requirements will

be fulfilled in the future . . . A former employee

who has neither a reasonable expectation of

to covered employment nor a color-

able clain to vested benefits, however, simply

does not fit within the [phrase] “may become

eligible.”

Firestone, supra, 489 U.S. at 117-118. By this writer’s

understanding, this Court was rather meticulous in

underscoring the present and/or future right to claim

benefits.®

There is certainly no mention in that decision of what

can best be described as the “retained standing” which

Partners espouses in its Petition. Indeed, the only concern -

expressed over the Court’s decision in Firestone is in

Justice Scalia’s concurring opinion which suggests a con-

cern that the Court’s “colorable claim” rationale may be

too expansive. Nowhere in Firestone is there so much as a

hint that one who may have been a “participant” in the

past continues ad infinitum as a participant for standing

or any other purposes under an ERISA plan.

D. The Harris Decision

Partners has accused Atkins of providing a mislead-

ing interpretation of Harris v. Provident Life and Acc. Co.,

supra. It is Partners’ argument that, in Harris, lack of a

former employee's standing was found “only because he

had never been enrolled in the employee benefit plan.”

Partners’ Petition, pp. 19-20. While it is true that the

plaintiff in Harris had never been enrolled in the plan,

there is nothing from the text of that decision which

would lead anyone to logically conclude that his lack of

® In Firestone, all of the former employees who were found

not to have standing at one time had vested benefits under one

or more Firestone plan.

sai |

iii

standing was only based on this factor. Given the Ninth

Circuit’s rather detailed discussion of who has partici-

pant status, it is a strained and contrived interpretation of

that decision to argue that plaintiff’s never having been a

participant played any role in the analysis of the court:

Whether a person is a plan participant must be

decided as of the time the filing of the lawsuit.

[citations omitted] At the time of filing suit,

Lawrence Harris was a former employee of Lin-

coln. A former employee is a plan participant

only if he has “a reasonable expectation of

returning to covered employment or [has] a col-

orable claim to vested benefits. [citation omit-

ted] The Harrises have not established that

Lawrence Harris has either. [emphasis added]

26 F.3d at 933. The Harris court mentions not a single

word inthis reasoning about Lawrence Harris’ never

having been a participant. Rather, it discusses his status

at the time of filing suit. If the Harris test were as

Partners argues, one must ask why did not the Harris

court simply say so.

Neither Harris nor any other decision referenced by

Partners stands for the proposition asserted by Partners.

Under the pellucid words of the statute defining “partici-

pants”, and this Court’s well-reasoned opinion in Fire-

stone, such an interpretation would be clearly erroneous.

E. Atkins’ “Colorable” Claim

As Partners tells it, Atkins’ colorable claim for bene-

fits is a CT Scan.9 Partners’ Petition, p.21. Were it not so

frivolous, this argument might be interesting. Keeping in

mind that participant status is determined at the time suit

is filed, the following facts are indisputable: (1) the CT

Scan was for the purpose of determining what was caus-

ing Atkins’ intolerable headaches; (2) prior to the rupture

of her aneurysm, Atkins neither had nor paid for a CT

Scan on her own; (3) once the aneurysm ruptured, any

medical necessity for a diagnosis of the cause of Atkins’

intractable headaches was fully exposed”, and a diagnos-

tic CT Scan for purposes of avoiding irreparable harm

became irrelevant.

Exposing Partners’ illogic in this argument for what

it is, this Court should look to its own language in Fire-

stone, supra (“[s]he will prevail in a suit for benefits”),

and a case referred to by Partners in one of the footnotes

(3) to its Petition and which speaks most loudly in Part-

ners’ favor. In Panaras v. Liquid Carbonic Industries Corpo-

ration, 74 F.3d 786, 790 (7th Cir. 1996), the court stated:

[H]is claim [for purposes of determining stand-

ing] must rest on “a colorable claim to vested

benefits.”

° Atkins will discuss the “benefits v. damages” aspect of

this claim more fully later in this Opposition.

10 Indeed, it is somewhat ironic that Atkins finally received

a CT Scan of her head - which Partners paid for - after the

aneurysm ruptured and she was taken to the emergency room.

a een. eae

The requirement of a colorable claim is not a

stringent one. This circuit has noted that “Juris-

diction depends on an arguable claim, not on

success” and that only if “any claim . . . must be

frivolous is jurisdiction lacking.”

Assuming arguendo that the burden to prove lack of

standing rests with Atkins, and, as Partners argues, the

colorable claim to benefits is the CT Scan, under Panaras,

one must ask whether a suit for that benefit brought at

the time this suit was filed would have been frivolous.

The only conclusion in this regard is that such a suit

would have been ludicrously frivolous. Once Atkins’

aneurysm ruptured, and surgical repair was achieved,

there was no need for diagnosis of what was previously

creating the pressure inside Atkins’ head. Atkins did not

pay for the CT Scan in question from her own pocket.

Nor, did she have the CT Scan performed despite Part-

ners’ denial and incur a liability to a radiologist. There-

fore, she had no colorable claim to recover those expenses |

which Partners’ plan was to have provided because she

never expended any her own funds or incurred a liability

which the plan was to pay for. Once the aneurysm rup-

tured, the only colorable claim to benefits Atkins possibly

could have had related to continued care as provided for

under the Partners’ plan if she had continued coverage.

However, she discontinued coverage and, at that point,

any claim for benefits under the plan was extinguished.

Ah ARMS He ea we a

Partners can point to not a single penny of benefits

which may have been due Atkins at the time this suit was

filed and for which Atkins could have maintained a color-

able claim. Had the CT Scan at one time in the past been a

vested benefit under Partners’ plan, at the time this suit

was filed a claim for that benefit no longer existed.

F. The “But For” Line of Cases

Candor requires discussion of the extremely limited

scenario wherein circuit courts of appeal have granted

participant status to a former employee who has neither a

foreseeable prospect of re-employment nor a colorable

claim for vested benefits. Under the “but for” doctrine

participant status was allowed - particularly in light of

allegations of wrongful discharge - where:

[B]ut for the employer’s conduct alleged to be in

violation of ERISA, the employee would

[emphasis in original] be a current employee

with a reasonable expectation of receiving bene-

fits, and the employer should not be able

through its own malfeasance to defeat the

employee’s standing.

Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1221 (5th Cir.

1992).

The following language found in Vartanian v. Mon-

santo Co., 14 F.3d 697, 703 (1st Cir. 1994) exemplifies the

very limited circumstances under which the “but for”

doctrine has applicability in expanding participant status:

We hold that where an employee alleges a

decision to retire based on alleged misrepresen-

tations by his employer amounting to a breach

of fiduciary duty, and the true facts are not

available to the employee until after the

employee has received all his vested benefits

under a plan; and further, where the employee

shows that in the absence of the employer’s

breach of fiduciary duty he would have been

entitled to greater benefits than those which he

received, then his receipt of payment cannot be

used to deprive him of “participant” status and

hence, standing to sue under ERISA. [emphasis

added]

None of the requirements of Vartanian can be demon-

strated in the instant case. Atkins’ termination with her

former employer had nothing to do with any representa-

tions the former employer or Partners made. Indeed, her

choice to end coverage and any rights to benefits under

the Partners’ plan were completely independent of any

action on the part of either Partners or her former

employee. To the contrary, the only reason Atkins

remained enrolled post-employment with her previous

employer in Partners’ plan was for the purpose of contin-

uation of coverage while she awaited eligibility under her

new employer’s health insurer.

To expand the definition of “participant” to include

Atkins as Partners argues is appropriate would defeat the

spirit and letter of both ERISA and the “but for” cases.

Partners sole reason for attempting to convolute the defi-

nition of “participant” is to expand without any authority

upon the legerdemain which ERISA has become, and

avoid responsibility for the damages it has inflicted on

Atkins.

G. Benefits vs. Damages

Partners claims that Atkins “has already acknowl-

edged”, Partners’ Petition, p. 23, her suit seeks benefits.

This writer must point out that it is extremely difficult to

aia areal

acknowledge what one cannot comprehend. Is Partners

talking about the pain and suffering benefit under its

plan? The emotional distress benefit? Disfigurement?

Lost earning capacity? Loss of the enjoyment of life?

Atkins can find no provision in her Partners manual

which describes these “benefits” and assumes the plan

does not provide any such benefit.

All vituperation aside, Partners’ reliance on Sommers

Drug Stores Co. Employee Profit Sharing Trust v. Corrigan,

83 F.2d 345 (5th Cir. 1989) is substantially misplaced.

While it is true that the distinction between benefits and

damages is at times difficult of ascertainment, in the

instant situation, there is no difficulty whatsoever. The

only benefits Partners can point to under its plan are the

payment of health care related expenses while a partici-

pant is enrolled in the plan. Partners did not provide nor

can it argue it provided Atkins with some type of long

term or no fault accidental disability coverage. Atkins

was only covered for certain necessary health care costs.

And, she was only covered while she paid for continua-

tion coverage under her ERISA plan.

Interestingly, the Sommers court noted that a claim for

an “unascertainable amount” is a claim for damages, 883

F.2d at 349. Likewise, Atkins’ claim is one which could

never be made certain by computation. It is clearly a

claim for damages.

This Court should see the wolf through sheep’s

clothing which lies at the heart of Partners’ “benefits vs.

damages” claim. What Partners is really arguing, but

cannot overtly, is that Atkins’ claim for damages arises

out of a denial of benefits under an ERISA plan. Purpor-

tedly, it, therefore, relates to an ERISA plan, and preemp-

tion must apply. However, Partners is foreclosed from

making such an argument by Arizona Carpenters Pension

Trust Fund v. Citibank, 96 F.3d 1317 (9th Cir. 1996).11 In

Arizona Carpenters, the Ninth Circuit recognized that a

state law)? “relates to” an employee benefit plan, “if it

has a connection with or reference to such a plan.” Shaw

v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890,

2900, 77 L.Ed. 2d 490 (1983). Preemption under ERISA

“extends to all claims which, directly or indirectly, arise

from administration of the plan. Concha, supra, 62 F.3d at

1504-05.”

On the other hand, “[nJotwithstanding the

remarkable legerdemain that has turned a stat-

ute designed to protect employees’ pension

rights into a law that strips them of most of the

protection they previously enjoyed under state

law, there are limits to the unusually broad pre-

emptive sweep we have afforded ERISA.” [cita-

tions omitted] . . . For example, ERISA does not

preempt state law claims if plaintiffs have no

standing to challenge the ERISA violations.

[citation omitted] Similarly, “[i]f the plaintiff is

not a participant, beneficiary, or fiduciary, then

his state law claims fall outside ERISA’s sphere

and are not subject to preemption.”

96 F.3d at 1317.

11 This case is glaring in its absence from inclusion in the 22

precedents cited in Partners’ footnotes 3 & 4 (pp. 15-16 of

Partners’ Petition), which purportedly contain all important

circuit court decisions on the issue of standing under ERISA.

12 Such as a common law claim for negligence or breach of

contract.

Atkins’ claim arises out of a “benefit [which was]

denied”. It is not a claim for benefits. Unless she had a

colorable claim for benefits at the time this action was

filed, she did not have standing to pursue an ERISA

action whether her claim related to the plan or not. She

had no such colorable claim. Her action sounds solely in

damages not for the purpose of evading ERISA. Rather,

the only claim Atkins has is for damages. She has no, nor

had at the time of filing, standing to bring a claim under

ERISA.

The lower courts have done no violence to Firestone.

Their decisions must stand.

II.

UNDER THE CLEAR LANGUAGE OF 28 U.S.C.

§ 1447(d), APPELLATE REVIEW OF A DISTRICT

COURT’S ORDER OF REMAND IS INAPPROPRIATE

WHERE THE SOLE BASIS FOR SUCH ORDER OF

REMAND IS LACK OF SUBJECT MATTER JURISDIC-

TION.

Partners’ reference to Quackenbush v. Allstate Insur-

ance Co.,__ U.S. __, 116 S.Ct. 1712 (1996), and the fact

that it “overruled” Thermtron Products, Inc. v. Her-

mansdorfer, 423 U.S. 336 (1976) is somewhat misleading in

light of the argument Partners goes on to make. The

Court’s disapproval of Thermtron is limited to the pro-

cedural vehicle for review of an order of remand, i.e.,

writ of mandamus vs. direct appeal from an interlocutory

order. In Quackenbush, this Court allowed for direct

appeal, because the lower court’s order of remand was

“functionally indistinguishable from the stay order we

found appealable in Moses H. Cone.”15

Nowhere in Quackenbush did this Court so much as

hint that 28 U.S.C. § 1447(d) no longer lacked vitality or is

invalid and that orders of remand based on a lack of

subject matter jurisdiction may be reviewed.

In this case, the District Court’s order was solely

based on its lack of subject matter jurisdiction notwith-

standing Partners’ claims to the contrary. Nothing in the

District Court’s order and the Ninth Circuit’s refusal to

review it does vioience to the holding in Executive Soft-

ware v. U.S. District Court, 24 F.3d 1545, 1549 (9th Cir.

1994):

[I]n this circuit, to qualify as “collateral” the

order must resolve[ ] the merits of a matter of

substantive law [emphasis in original] apart from

any jurisdictional decision.

Clearly, in order to determine whether a statutory scheme

such as ERISA confers subject matter jurisdiction on the

court, any district judge must analyze the statute. It

would be impossible to determine the existence or non-

existence of subject matter jurisdiction without such anal-

ysis. The issue to be determined is whether the district

court’s analysis of a substantive question of law goes

beyond the “ambit of section 1447(c)”. Clorox Company v.

United States District Court, 779 F.2d 517, 520 (9th Cir.

1985). If it does, the order is reviewable; if it does not,

jurisdiction for review does not exist.

13 Moses H. Cone Memorial Hospital v. Mercury Constr. Corp.,

460 U.S. 1, 103 S.Ct. 927, 74 L.Ed. 2d 765 (1973).

Eminently on point given the issues in the instant

action is Survival Systems v. United States District Court,

825 F.2d 1416, 1418 (9th Cir 1987), wherein the Court

held:

“The ruling of the district court was that the

State causes of action alleged in Rodriguez's

complaint was not an artfully pled federal claim

that was preempted by federal labor law. This

did not finally resolve the issue of preemption,

which could still be raised as a defense to the

state claim in the state court. Thus, if the proof

in state court were such as to justify the conclu-

sion that the cause of action was completely

preempted by federal labor law, the defense of

preemption could be sustained. The ruling of

the district court was simply that the allegations

of the complaint did not justify such a result

Therefore, the remand is not reviewable on

appeal as a substantive decision under the doc-

trine of Pelleport'4 and Clorox [supra].

Neither has the issue of preemption — or any other sub-

stantive issue — been foreclosed by the District Court's

remand order in the instant case. Based on the facts

available to the District Court, Atkins did not fall within

the definition of a “participant”, and therefore her claim

was not preempted. Based on her pleadings, a federal

question did not exist and remand on the basis of lack of

subject matter jurisdiction was not only appropriate but

mandatory. As such, no appellate review is allowable

14 Pelleport Investors, Inc. v. Budco Quality Theaters, Inc., 741

F.2d 273 (9th Cir. 1984).

under 28 U.S.C. § 1447(d). Should Partners develop suffi-

cient facts in the Arizona State Courts, the defense of

preemption is available to it. See, New Orleans Public

Service v. Majoue, 802 F.2d 166, 168 (5th Cir. 1986) (Hold-

ing district court’s remand order is only res judicata as to

the forum. “The issue [of ERISA preemption] should now

be determined together with the merits, in the first

instance, by the [state] courts.”)

Partners has accurately listed the five considerations

to be weighed in determining the propriety of a writ of

mandamus. However, Partners has blatantly mis-

construed and misrepresented the import of the Ninth

Circuit’s decision in Survival Systems, supra. In Survival

Systems, the court did find the third factor (whether the

district court’s order constitutes clear error as a matter of

law) dispositive. However, that factor was found to be

dispositive because the district court did not err and,

therefore, it would have been inappropriate to grant relief

via mandamus. The converse as propounded by Partners

is riddled with logical fallacy, and is simply not a fair

statement of the law. Were the third factor dispositive in

all cases - as it would have to be according to Partners’

argument — why the need for having four other factors?

Clearly, the additional four factors are not included in

order that circuit court judges will perform weighing

tests regarding them, only to have whatever weight may

be accorded of no materiality because factor three is

always dispositive.

However, in this case, notwithstanding Partners’

attempted misuse of Survival Systems, the third factor is,

indeed, dispositive because “[wJhen the district court’s

order is correct as a matter of law .. . the writ of

mandamus should not issue.” 825 F.2d at 1418. Here the

District Court’s order is correct as a matter of law for

reasons set forth in detail, supra.

Even were there a need for the Court to consider the

other four factors, Partners has provided no persuasive

argument as to why it should prevail. (1) Partners retains

all appellate remedies afforded by Arizona law; (2) there

is no indication that the Arizona judiciary cannot or will

not apply the appropriate law, and therefore there can be

no showing of prejudice or damage; (3) Partners has

pointed to no other case which has arisen since the enact-

ment of ERISA on all fours with this one, and therefore its

“oft-repeated error/persistent disregard” argument is

founded upon nothing; and (4) the district court’s order is

in keeping with numerous other orders out of the various

circuits and this Court on the issue of who constitutes a

“participant” for standing purposes and is consistent

with all such pronouncements.

The Ninth Circuit panel which dismissed Partneis’

appeal and denied its petition for a writ of mandamus

did absolutely nothing at variance with its decision in

Executive Software v. United States District Court, 24 F.3d

1545 (9th Cir. 1994), as Partners argues.}5

15 In Executive, the Ninth Circuit noted that the district

court remanded part of the action but “retained jurisdiction

over the federal claims.” The court noted that it had previously

held that retention of jurisdiction over at least one of the claims

“removes the possibility that a remand order is issued pursuant

to section 1447(c), Kunzi v. Pan American World Airways, Inc., 833

F.2d 1291, 1295 (9th Cir. 1987),” and as such section 1447(d) does

not act as a bar to review. 24 F.3d at 1549. Here, the District

Court remanded Atkins’ entire claim. That portion of the

Pursuant to 28 U.S.C. 1447(d), the Ninth Circuit

lacked jurisdiction to review this case by appeal or other-

wise. For the same reasons, this Court must deny Part-

ners’ Petition for a Writ of Certiorari.

CONCLUSION

At the time Atkins brought suit against Partners

seeking damages, she did not, under any theory, meet the

definition of a “participant” under ERISA as defined by

29 U.S.C. § 1002(7). As such she lacked standing to bring

an action in federal court, and, because Atkins’ claims are

not preempted, she is free to pursue her state court

claims. The District Court lacked subject matter jurisdic-

tion over this case and properly remanded it to state

court on that basis.

Neither the Ninth Circuit had nor this Court has

jurisdiction to review the District Court’s order under the

clear terms of 28 U.S.C. § 1447(d). Neither would a writ of

mandamus have been appropriately issued by the Ninth

Circuit, nor would a writ of certiorari appropriately issue

from this Court.

Executive analysis relied upon by Partners, as such, does not

even apply to this case. The entire balance of that case speaks

against Partners’ argument.

Therefore, Partners’ Petition for a Writ of Certiorari

must be denied and any relief sought thereunder denied.

Respectfully submitted,

Gary S. GRYNKEWICH

WHITEHILL, LINDEN,

GRYNKEWICH & HA.vapay, P.C.

Williams Centre

Suite 500, 5210 East Williams

Circle

Tucson, Arizona 85711

(520)-745-8000

Attorneys for Respondent

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