Petition for Writ of Certiorari — Painter v. Golden Rule Insurance

Supreme Ce

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IN THE

Supreme Court of the Anited States

OcTOBER TERM, 1997

ANA MariA PAINTER

Petitioner,

VS.

GOLDEN RULE INSURANCE COMAPNY.

Respondent.

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

S. SHELDON WEINHAUS

(Counsel of Record)

WEINHAUS AND DosBson

906 Olive Street

Suite 900

St. Louis, Missouri 63101

(314) 621-8363

Attorney for Petitioner Painter

St. Louis Law Printing, Inc. 14239 Manchester Rd. Manchester, MO 63011 314-231-4477

QUESTIONS PRESENTED

1. Are disputes between a health insurer who has not served as

an ERISA primary party and the policyholder which arise under

individual policies of conversion issued after the termination of

COBRA coverage, preempted by ERISA? Does it make any

difference whether the employer and the benefit plan had already

terminated any relationship with that insurer and thereby termi-

nated COBRA coverage?

2. Does ERISA preemptstate regulation of conduct of a health

insurer who is not an ERISA primary party, with respect to the

insurer’s instituting and continuing litigation in controvention of

ERISA §502(a)(1)’s limitation of suits to determine partici-

pants’ rights to participants and beneficiaries? Is a state suit

attacking such litigation conduct by the health insurer removable

to the federal district court?

TABLE OF CONTENTS

QUESTIONS PRESENTED .........:.0.ccccsccscoseosssessseseeces

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APPENDIX A

Opinion of the United States Court of Appeals for

- the Eighth Circuit, dated August 14, 1997 ...........

APPENDIX B

Order of the United States court of Appeals for the Eighth

Circuit denying rehearing and rehearing en banc,

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APPENDIX C/D

Order and Memorandum decision of the United States

District Court for the Eastern District of Missouri,

dated July 8, 1996

STOP HHHEEHEHEEEO ETE EEE EEE EEE EEE EEE E EE EES

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TABLE OF AUTHORITIES

CASES CITED: Page(s)

Ana Maria Painter v. Golden Rule Ins. Co. et al, No.

4:96CV1917-ERW (E.D. Mo. memorandum

decision, unpublished, October 14, 1997) ............

Andrews-Clark v. Travelers Ins. Co., 1997 Westlaw

677932, 1997 U.S. Dist. LEXIS 17390 (D. Mass.

CI, SS WA a ic.is suse ser deticoneaiensbadaousmaarenadeamoniiees

Barker v. Ceridian Corp., 122 F.3d 628 (8th Cir. 1997)

Beal v. Jefferson-Pilot Ins. Co., 798 F.Supp. 673 (S.D.

PR, TWD sacsachsicicssssacsscssscsssastapeasecsasveranscdeoncsvavess

Corcoran v. United Health Care, Inc., 965 F.2d 1321

iy BD iciicdiinnn winds; Goinheice und tuihacadmaceuiacebnion

DeBuono v. NYSA-ILA Medical and Clinical Services

Fund, 117 S. Ct. 1747, 138 L.Ed.2d 21 (1997) ....

Durham v. Health Net, 108 F.3d 337 (table), 1997

Westlaw 66558 (9th Cir.), cert. denied, 118S.Ct.51

ED cctisineiasiictittitusechtonsgcnestpsneicaminaowenecadscamaeneacasie

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

Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341

CO TU Ge Dae nkciinisciivcnsbicindeinninniocnn tuations

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

2 CO Ei Fe siete tesa tintiincntsicnesineezeiresanliganaiice

Guidry v. Sheet Metal Workers National Pension Fund,

39 F.3d 1078 (10th Cir. 1994) (en banc), cert.

denied, S14 U.S... 1063 (TI9S) ..ccccescsorsesessssercenesoess

Henkin v. Northrup Corp., 921 F.2d 864 (9th Cir. 1990)

14

10

Howard v. Gleason Corp., 901 F.2d 1154 (2nd Cir. 1990) 15

International Resources, Inc. v. New York Life Ins. Co.,

950 F.2d 294 (6th Cir. 1991), cert. denied, 504 U.S.

FTP LEE, ioiAstndcannidicneeaads

Klosterman v. Western General Management, Inc., 805

RN PF CON AO TE: SDP) sain sassdpseieaeovicnnivcbnennes

Mays v. UNUM Life Ins. Co. of America, 1995 Westlaw

FLT ee AE Os BOR er cniciidee ig ea

McCale v. Union Labor Life Ins. Co., 881 F.Supp. 233

CDi. SO CIID sisnisiieasnensnaiaeccaan anaes

McDonald v, Professional Insurance Corp.,946 F.Supp.

DE3-( MLD Ala: 1996) os ississsicciccssccicnnecstctaeee:

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S.

TOOT TEE wiitnistusivscscccaciedieneetiigacaiar a aes

Mimbs v. Commercial Life Ins. Co., 818 F.Supp 1556

(GED: SOR, TOP cisviicaseaciccedinamiaeereielmaameeans

New York State Conference of Blue Cross & Blue Shield

Plans v. Travelers Insurance Co., 514 U.S. 645

HPP OS? -sitticiccteaceadneaieee a

Peterson v. American Life & Health Ins. Co.,48 F.3d 404

(9th Cir.), cert. denied, 116 S. Ct. 377 (1995)...

Powers v. United Health Plans of New England, Inc.,

979 F.Supp. 64 (D. Mass. 1997) wo... eeeeeeeeeee

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

ree aE OD shri ctdcdcdesceceacdieacaaeeaoee

Reynolds v. Mass. Cas. Ins. Co., 113 F.3d 1450

AS Ae. f , SIREN RCO REE Mare ES

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15

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12

12

10

12,14

10,12

1]

came Yi. cums

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ....... 7)

Tingey v. Pixley-Richards West, Inc., 953 F.2d 1124

(POCA, SIP tcteasscisnevctcstanicth leben stietniants 12

United of Omaha v. Business Men’s Assurance Co. of

America, 104 F.3d 1034 (8th Cir. 1997) 0.0.0... 10

Vaughn v. Owen Steel Co., 871 F.Supp. 247

ED. BAG. SG) cs acini acivescsscesed akinldeiigan anaes 13

Waller v. Blue Cross, 32 F.3d 1337 (9th Cir. 1994)..... 15

STATUTES CITED:

LS U.S.C. 86 IGGL, OF 006) cccescscsscascieasicotesGataontien 17

ZF URS. QRS scvisiecvcanscscceciusiesdhunicomsseuareaeaamaaaas 3

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OP WL, GIRES ccssscssnscssceaNesvisecasctaneeneaamagael 16

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BF UK, GEESE sccsssssnscavesscelanicctneegiateenaaneaamaas 7

BF U.S hos. Fh PEW scsersscerietaennneeee 1 ,4,9,10,17

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— vii—

REGULATIONS CITED:

Se I everteniccicinsceinssocsniovetecvndesecnsosenins 15

BF eel he PRIORI) cncvsccvccccsccssnacsnncsoceseebseosees 14

OTHER AUTHORITIES:

Brustad, Orin D., Perspective--Health Plans that Don’t

Comply with ERISA and the Code--What, Me

Worry? 10 Benefits Law Journal No.4

ee 16

PETITION FOR WRIT OF CERTIORARI

Petitioner, plaintiff and appellant below, prays that a writ of

certiorari issue to review the judgment and opinion of the United

States Court of Appeals for the Eighth Circuit, which affirmed

the decision of the district court, on August 14, 1997, so that this

Court might

(1) resolve or reduce the confusion that continues to exist

unabated in actions brought by individuals, with respect to

the words “relates to” in the supercession provision of §514

of the Employee Retirement Income Security Act (ERISA),

29 U.S.C. §1144(a), as covering misconduct committed

outside of and following conclusion of benefit plan admin-

istration, and in which entitlement to plan benefits would be

irrelevant, and

(2) resolve or reduce the confusion that exists with respect

to whether health coverages provided in health insurance

conversion policies that exist between the former employee

and the state-regulated commercial health insurer, and

under which the obligations referred to in Fort Halifax

Packing Co. v. Coyne, 482 U.S. 1, 9, 11 (1987), are

disclaimed or nonexistent, constitute ERISA benefit plans

because the terms of the prior plan or Congressional man-

date made some reference to or compelled the issuance of

that conversion policy.

There is compelling reason for review: first, the importance of

health insurance coverage concerns, the more so as a result of the

Health Insurance Portability and Accountability Act (Pub. L.

104-141), which in part amends ERISA, “locking” even more of

the disadvantaged community into ERISA preemption lon g after

any employment relationship terminated; second, a present lack

of uniformity amongst the circuits and the district courts in

determining in which forum, federal or state, and under what

7

—, is

laws is the conduct of those insurers not serving as plan administra-

tors, plan fiduciaries or any other of the ERISA “quartet,” to be

judged, defeating the strong Congressional desire for national

uniformity if conversion policies truly constitute preempted

ERISA plans; and third, if individual conversion policies are

determined to be ERISA benefit plans, such will allow the

Secretary to engage in further rule-making and regulation, for

until now there appears to be no attempt by the Secretary to so

require registration of such “plans” under ERISA §103 and

§104, 29 U.S.C. §§1023, 1024, or issue regulations pertaining

thereto.

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Eighth Circuit, rendered August 14, 1997, is reported at 121 F.3d

436, and is reprinted in the appendix hereto as A-1 to A-10. A

petition for rehearing or rehearing en banc was denied Novem-

ber 17, 1997, and appears in the appendix as A-11. The opinion

of the United States District Court for the Eastern District of

Missouri is not published, but is reprinted in the appendix as A-

12 to A-16.

JURISDICTIONAL STATEMENT

Petitioner instituted this action in the state court alleging the

state tort of prior abuse of legal process by the respondent who

was never a member of the ERISA “quartet;” petitioner claimed

neither benefit under an ERISA benefits plan or under an

insurance policy, nor wrongful benefit denial in her suit. Respon-

dent removed this action to federal court. The district court

asserted that it had jurisdiction of this action pursuant to 28

U.S.C. §1331 and 29 U.S.C. §1001 et seq; found petitioner had

pleaded no valid ERISA cause of action and granted summary

judgment in favor of respondent; and entered a final judgment

with prejudice against petitioner.

—

An appeal was taken to the Eight Circuit Court of Appeals

pursuant to 28 U.S.C. §1291. The judgment of the Court of

Appeals was entered August 14, 1997. Petitioner filed a petition

for rehearing by the panel, or, alternatively, for rehearing en

banc. The Court of Appeals denied the petition November 17,

1997.

The Department of Labor sought leave to file a memorandum

in favor of rehearing, opposing the extension of ERISA preemp-

tion to relations between insured and insurer under individual

conversion health insurance policies. The Court of Appeals

rejected the memorandum as out of time on December 17, 1997

and never considered the substance of the government’s argu-

ment.

Pursuant to Supreme Court Rule 13.1, this petition has been

filed within 90 days of the denial of rehearing. The jurisdiction

of this Court is invoked pursuant to 28 U.S.C. §1254(1).

STATUTES INVOLVED

ERISA (29 U.S.C.), as amended by COBRA and HIPAA,

provides:

§1002. Definitions

For purposes of this subchapter:

(1) The terms “employee welfare benefit plan” and “welfare

plan” mean any plan, fund, or program which was heretofore or

is hereafter established or maintained by an employer or by an

employee organization, or by both, to the extent that such plan,

fund, or program was established or is maintained for the

purpose of providing for its participants or their beneficiaries,

through the purchase of insurance or otherwise, (A) medical,

surgical, or hospital care or benefits.

(5) The term “employer” ineans any person acting directly as

an employer, or indirectly in the interest of an employer, in

relation to an employee benefit plan;

(16)(A) The term “administrator” means--

(i) the person specifically so designated by the terms of the

instrument under which the plan is operated;

(ii) if an administrator is not so designated, the plan sponsor;

§1144. Other laws

(a) Supersedure; effective date

Except as provided in subsection (b) of this section, the provi-

sions of this subchapter and subchapter III of this chapter 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.

(b) Construction and application

(2)(A) Except as provided in subparagraph (B), nothing in this

subchapter shall be construed to exempt or relieve any person

from any law of any State which regulates insurance, banking, or

securities.

§1162. Continuation coverage

(2) Period of coverage

The coverage must extend for at least the period beginning on

the date of the qualifying event and ending not earlier than the

earliest of the following:

(A) Maximum required period

(i) General rule for terminations and reduced hours

—

In the case of a qualifying event described in section

1163(2) of this title, except as provided in clause (ii), the

date which is 18 months after the date of the qualifying

event.

(B) End of plan

The date on which the employer ceases to provide any

group health plan to any employee.

(5) Conversion option

In the case of a qualified beneficiary whose period of

continuation coverage expires under paragraph (2)(A), the

plan must, during the 180-day period ending on such

expiration date, provide to the qualified beneficiary the

option of enrollment under a conversion health plan other-

wise generally available under the plan.

§1181. Increased portability through limitation on preexist-

ing condition exclusions

(e) Certifications and Disclosure of Coverage.--

(1) Requirement for certification of period of credible

coverage.--

(A) In general.--

A group health plan shall provide the certification de

scribed in subparagraph (B)--

(i) at the time an individual ceases to be covered under the

plan or otherwise becomes covered under a COBRA con-

tinuation provision,

(ii) in the case of an individual becoming covered under

such a provision, at the time the individual ceases to be

covered under such provision, and

(B) Certification.--

The certification described in this subparagraph is a written

certification of--

(i) the period of creditable coverage of the individual under

such plan and the coverage under such COBRA continua-

tion provision, and

STATEMENT OF THE CASE

Petitioner worked for M.D. Care, Inc., which provided her and

her co-employees with group health benefits through the pur-

chase of a health insurance policy from respondent Golden Rule

\sstrance Company. She required treatment for ovarian cancer,

* 1er employment was terminated at the end of August 1992.

She was offered and elected coverage under the Consolidated

Omnibus Budget Reconciliation Act of 1985 (COBRA). During

this period of COBRA coverage petitioner moved to Missouri

where the health insurer, respondent, refused to preauthorize

high dose chemotherapy recommended by petitioner’s various

oncologists. Petitioner claimed that refusal was in conflict with

the terms of the COBRA coverage. After only five months of

COBRA coverage, on February 1, 1993 M.D. Care, Inc. can-

celed the group policy and ceased any relationship with respon-

dent insurer. Its plan, if it continued, no longer provided health

benefits through any policy issued by respondent. Petitioner did

not hear from the employer again. No one then offered to

continue petitioner’s COBRA coverage which had another 13

months to run.

Later, in April 1993, respondent insurer offered to provide |

petitioner an individual policy which respondent designated a |

conversion policy, but at much higher rates and with far different

terms than in the prior group policy, to be made retroactive to

February 1. The delay in making such offer has never been

NN |

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explained. Having no other alternative because of her medical

condition, petitioner accepted.

Notwithstanding lack of preauthorization, petitioner as then

Medicaid qualified, was finally able to obtain the high dose

chemotherapy treatment, and later presented her medical bills to

respondent for payment. Respondent refused to pay under the

terms of the conversion policy. After its final denial and contrary

to the terms it imposed in its policy preventing suit, respondent

filed suit against petitioner in the Eastern District of Missouri,

alleging that it was a “participant.” (“Painter I’’). At no time did

respondent claim to be either employer, plan sponsor, plan

administrator, plan fiduciary or an ERISA “primary party.” But

it did allege jurisdiction under ERISA, sought declaratory relief

provided under ERISA §502(a)(1), 29 U.S.C. §1132(a)(1) only

to participants and beneficiaries, and also sought an order that

petitioner pay its costs and fees even though it knew petitioner

was virtually penniless. Petitioner’s dismissal motions were

ignored; she was obliged to prepare for trial.

During the course of proceedings in Painter I, respondent (as

plaintiff) advised the court that not only in its view did petitioner

have claims under ERISA for its denial of coverage, but also

under the Americans with Disabilities Act and Title VII of the

Civil Rights Act, and that the Equal Employment Opportunity

Commission had not yet issued right-to-sue letters. What the

Court of Appeals said was three years after respondent instituted

that prior suit, the district court permitted respondent to volun-

tarily dismiss without prejudice under Fed. R. Civ. P. 42(a)(2).

Petitioner then filed the instant suit (“Painter IT’) in the state

court solely against respondent for abuse of process under state

law. Missouri recognizes that civil actions may be abusive or

brought for abusive purposes, and makes such a tort. In her state

court suit petitioner did not claim entitlement to any plan benefit,

or that such benefit had been wrongfully denied. Only

_ va

respondent’s litigation conduct as insurer was challenged. There

was no challenge to any prior internal claims administration,

which had come to an end before respondent had earlier filed its

suit, which was not authorized by ERISA. Petitioner sued no

ERISA primary party.

Respondent removed the suit to the Eastern District of Mis-

souri. The district court rejected petitioner’s motion to remand,

found that the suit petitioner filed dealt with ERISA benefits

under the conversion policy, ignored any possible ADA and

CRA claims that ERISA does not preempt, and found the suit

wholly ERISA-preempted because the conversion policy from

which the district court viewed petitioner’s claim to have ema-

nated, constituted an ERISA welfare benefits plan. The district

court offered petitioner no opportunity to amend, and dismissed

her suit with prejudice. App-12 to App-16.

The United States Court of Appeals for the Eighth Circuit

affirmed. App-1 to App-10. It opined that respondent’s ERISA-

prohibited litigation conduct after administrative denial was

only a “mishandling of that claim” and held that even if the

underlying group policy expired and the employer and plan

ended their use of respondent to fund plan benefits, all policies

having their origins emanating from ERISA plans are compo-

nents of the ERISA plans themselves.

REASONS FOR GRANTING THE WRIT

In actions in which individual interests rather than

institutional interests are involved, the lower courts are

still not heeding this Court’s admonition that the term

“relates to” is being applied far beyond allowable limits.

Performance by the insurer under individual health

insurance policies solely between the insurer and indi-

vidual policyholder, “emanating from” prior coverage

under ERISA group policies under COBRA or HIPAA

ae

a on

amendments to ERISA, does not “relate to” obligations

or administration of a prior ERISA benefit plan that no

longer exists for the group or the individual. Although

ERISA was enacted to create a “national uniformity,”

the courts cannot agree whether ERISA controls indi-

vidual conversion policies.

ERISA is a “comprehensive statute designed to promote the

interests of employees and their beneficiaries in employee ben-

efit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983).

ERISA’s general preemption clause, §514(a), preempts “any

and all state laws insofar as they . . . relate to any employee

benefit plan.” 29 U.S.C. §1144(a). This Court in three recent

decisions has focused attention on the traditional presumption

that Congress does not intend to preempt traditional areas of state

regulation without a clear and manifest statement of such pur-

pose.

If “relate to” were taken to extend to the furthest stretch of

its indeterminacy, then for all practical purposes pre-emp-

tion would never run its course, for “[r)eally, universally,

relations stop nowhere. . . .” But that, of course, would be

to read Congress’s words of limitation as mere sham, and to

read the presumption against pre-emption out of the law

whenever Congress speaks to the matter with generality.

New York State Conference of Blue Cross & Blue Shield Plans

v. Travelers Insurance Co., 514 U.S. 645, 655 (1995) (citation

omitted). Frankly observing that “our prior attempt to construe

the phrase ‘relate to’ does not give us much help in drawing the

line[,]” the unanimous Travelers Court held that courts must

“look instead to the objectives of the ERISA statute as a guide to

the scope of the state law that Congress understood would

survive.” Id. at 655-56. See also DeBuono v. NYSA-ILA Medical

and Clinical Services Fund, 117 S. Ct. 1747, 1751, 138 L.Ed.2d

21 (1997) (reiterating Travelers holding that the starting presump-

——

tion in ERISA preemption analysis is that Congress does not

intend to supplant state law).

It must be kept in mind that even without the continuation

obligations compelled by COBRA and by the Health Insurance

Portability and Accountability Act (“HIPAA”), state law usually

requires insurers to offer conversion rights. Courts have held

that state statutes mandating that insurers offer conversion rights

to plan participants whose employers have purchased group

policies not preempted. International Resources, Inc. v. New

York Life Ins. Co., 950 F.2d 294 (6th Cir. 1991), cert. denied, 504

U.S. 973 (1992); United of Omaha v. Business Men’s Assurance

Co. of America, 104 F.3d 1034 (8th Cir. 1997) (Missouri law

requiring health conversion coverage not preempted); Henkin v.

Northrup Corp., 921 F.2d 864, 867 (9th Cir. 1990). The

reasoning of these cases is based on Metropolitan Life Ins. Co.

v. Massachusetts, 471 U.S.724 (1985), where the Court held that

a Massachusetts statute of universal application to the insurance

industry mandating certain mental health benefits was not pre-

empted inasmuch as it was a form of insurance regulation

“saved” under ERISA § 514(b)(2)(A).

But at the same time the right to convert to an individual

insurance policy is also a benefit offered by many health, life,

and other group plans. As with other benefits such plans might

offer, this right to convert is governed by ERISA. Indeed, as it

applies to participants under COBRA, plan terms governing the

exercise of that right are specifically dealt with by the COBRA

statute which provides that if a conversion right is offered to

participants in general, it also must be offered on the same terms

to COBRA participants. 29 U.S.C. §1162(5).

When it comes to individual health insurance policies “ema-

nating from” a prior ERISA plan, there are many different views

as to whether such further coverage is subject t6 ERISA preemp-

tion. The differences were recently noted in Powers v. United

are ed

Health Plans of New England, Inc., 979 F.Supp. 64 (D. Mass.

1997). See also Glass v. United of Omaha Life Ins. Co., 33 F.3d

1341 (11th Cir. 1994).

One view, adopted by the Court of Appeals in the instant case,

is that there is ERISA preemption if health benefits provided

under the prior ERISA relationship makes a path for later

individual coverage with an insurer, whether a plan still exists or

not. See, e.g., Qualls v. Blue Cross of California, 22 F.3d 839,

843 n.4 (9th Cir. 1994) (“[i]f the policy was governed by ERISA

when he was [employed by] Saddleback, it continued to be

governed by ERISA once he left”);' Beal v. Jefferson-Pilot Ins.

Co., 798 F.Supp. 673, 675 (S.D. Ala. 1992) (the conversion

policy “is an “employee benefit plan’ under ERISA”); Mays v.

UNUM Life Ins. Co. of America, 1995 Westlaw 317102 (N.D. Ill.

1995) (individual conversion policy is an “extension of an

ERISA plan”). Cf. Glass v. United of Omaha Life Ins. Co., supra,

33 F.3d at 1346-47 (if conversion is to a “group policy” it is

preempted, but court expressly notes that it offers no opinion as

to conversion to individual policy). The Sixth Circuit opts for

this result if the continuation terms are the same as in the original

plan coverage, Reynolds v. Mass. Cas. Ins. Co., 113 F.3d 1450,

1453 (6th Cir. 1997), which did not occur in the instant case.

Although there have been no cases yet, since HIPAA rights also

emanate from prior participation in an ERISA plan, these courts

‘Although the issue in Greany v. Western Farm Bureau Life Ins. Co., 973

F.2d 812 (9th Cir. 1992) did not involve a dispute as to the actual terms of the

conversion policy, which were unquestionably complied with, but only as to

what the terms should have been, the language of the Ninth Circuit is

sufficiently broad to allow one to argue the dicta is that conversion policies

are part and parcel of continuing ERISA plans. /d. at 817. See also Peterson

v. American Life & Health Ins. Co., 48 F.3d 404, 407-08 (9th Cir.), cert.

denied, 116 S. Ct. 377 (1995).

— eo

would likely include ERISA preemption of any continued cov-

erage obtained as a result of the HIPAA provisions in ERISA.”

Another line of cases deal only with whether the right to

convert, and what are to be the terms of conversion, are subject

to ERISA. In these cases the courts do not venture further to

discuss what law controls when a dispute later arises under the

terms of a conversion policy. See, e.g., Tingey v. Pixley-

Richards West, Inc., 953 F.2d 1124 (9th Cir. 1992) (issue solely

as to right to convert, not performance under converted policy).

Some that do have to venture further find no preemption once the

conversion has occurred. Mimbs v. Commercial Life Ins. Co.,

818 F.Supp 1556 (S.D. Ga. 1993)

Another line of authority holds that there is no ERISA pre-

emption for conversions to individual policies, once the conver-

sion has properly taken place. E.g., Powers v. United Health

Plans of New England, Inc., supra, 979 F.Supp. at 69 (if

employer has no ongoing responsibility for the administration of

the policy, there is no ERISA plan and no ERISA preemption)’;

Mimbs v. Commercial Life Ins. Co., supra, 881 F.Supp. at 235-

36 (“claims arising under the post-COBRA conversion policy

itself, and not from the COBRA right to the conversion policy,

are not preempted by ERISA and are governed by state law”);

McDonald v. Professional Insurance Corp., 946 F.Supp. 943,

945 (M.D. Ala. 1996); McCale v. Union Labor Life Ins. Co., 881

?Although not a HIPAA case, Reynolds v. Mass. Cas. Ins. Co., supra, dealt

with a continuation policy which related to the underlying plan. It was nota

conversion policy.

*More recently, in what is “Painter IIT” (Ana Maria Painter v. Golden Rule

Ins. Co. et al, No. 4:96CV1917-ERW (E.D. Mo. memorandum decision,

unpublished, October 14, 1997), the district court sua sponte declared the

employer had no ongoing responsibility, and the plan could not be liable for

paying plan benefits to plaintiff once M.D. Care, Inc. terminated the Golden

Rule insurance and its relationship with respondent.

a) ee

F.Supp. 233, 235-36 (S.D. W.Va. 1995); Vaughn v. Owen Steel

Co., 871 F.Supp. 247, 248-49 (D. S.C. 1994).

Compelling reasons exist to address this question, especially

now that HIPAA is also included in ERISA. Health coverage

issues so directly affect one’s life, and are a matter of national

concern. ERISA preemption creates devastating results when

one is deprived of health care benefits promised in the policy.

Even the courts view ERISA as unfair or inadequate and can lead

to devastating results that are beyond the reach of equity to

correct and outside the court’s power to do anything about. See,

e.g.,Andrews-Clark v. Travelers Ins. Co., 1997 Westlaw 677932,

1997 U.S. Dist. LEXIS 17390 (D. Mass. Oct. 30, 1997) (court

has no authority to create a remedy for misconduct of medical

benefit plan administrators whose wrongful plan denial of plan

benefit leads to otherwise likely avoidable death of plan partici-

pant, no equity power to resurrect); Corcoran v. United Health

Care, Inc., 965 F.2d 1321 (Sth Cir. 1992) (although ERISA

remedy structure is deficient in medical benefit denial cases,

only Congress may correct); Durham v. Health Net, 108 F.3d

337 (table), 1997 Westlaw 66558 (9th Cir.), cert. denied, 118

S.Ct. 51 (1997) (where benefit plan delayed approval of a

medically necessary treatment until it was too late to be used to

help because of deterioration of patient’s health during the

wrongful-delay period, saving the plan money, no remedy for

unjust enrichment for monies plan saved). Yet in spite of this, as

the instant case illustrates, when it comes to individuals, even

without an employer or plan sponsor or an ongoing benefit plan

providing benefits and benefit administration, too many courts

still favor the finding of ERISA preemption that insulates insurer

breaches of aconversion policy from any meaningful remedy. In

conversion Cases, as the instant case, there is no longer even a

plan fiduciary to remove, not that such relief would help a dead

patient/policyholder.

pe

Below the Secretary attempted to argue that “the act of

converting from group to individual coverage severs the re-

quired nexus between the plan sponsor and the insured.” The

court in Mimbs v. Commercial Life Ins. Co., supra, 881 F.Supp.

at 1561-62 advised:

There is no showing that the conversion coverage in this

case contains the requisite elements of an ERISA plan.

Furthermore, once conversion has occurred and the policy

is in force, there is no longer any “integral connection”

between the individual conversion policy and the ERISA

plan that gave rise to the right to convert.

Likewise, there is no suggestion of any such “integral connec-

tion” in the instant case; in fact, the record shows the contrary.

Whatever connection the district court or the Eighth Circuit had

in mind in the instant case is a legal fiction. The Department of

Labor argued that

Once the conversion right is exercised and the conversion

policy is in the participant’s hands, the plan benefit (i.e. the

right to convert) has, in effect, been “paid,” and the ERISA

Statute does not follow the conversion policy any more than

it follows cash in the hands of a participant once cash has

been paid out by a pension plan. See, e.g., Guidry v. Sheet

Metal Workers National Pension Fund, 39 F.3d 1078,

1082, 1086 (10th Cir. 1994) (en banc) (holding state gar-

nishment laws not preempted with respect to money that

has been paid out to participant by pension plan), cert.

denied, 514 U.S. 1063 (1995). Aneven better analogy is the

status of annuity contracts issued upon the termination of a

pension plan. Even though the insurers who issue such

annuities have an administrative scheme for paying the

annuitants what they are owed, it is well established that

state law governs these annuities once the annuities are in

the hands of the participants. 29 C.F.R. §2510.3-3(d)(2)(ii);

ee

see Waller v. Blue Cross, 32 F.3d 1337 (9th Cir. 1994).

[footnote omitted]

In addition, the Secretary’s regulation at 29 C.F.R.

§2510.3-1(j) provides that group insurance arrangements,

are not ERISA-covered plans where (1) there are no em-

ployer contributions, (2) participation is voluntary, (3) the

role of employer is no more than to facilitate voluntary

payment of premiums by participants, and (4) the employer

receives no consideration. Individual conversion policies

satisfy each of these criteria. While this regulation was

admittedly designed for a purpose unrelated to conversion

policies (i.e., to provide a safe harbor to employers who

facilitate their employees’ voluntary purchase of insur-

ance), we think the four part test set forth in the regulation

is instructive.

Apart from the Secretary’s regulations, this Court in Fort Halifax

Packing Co. v. Coyne, supra, 482 U.S. at 9, 11, noted the

necessity of the employer and the continuing obligations ERISA

would impose on the employer were there a benefit plan to assure

preemption of state law.

The Department of Labor also took issue that several of the

cases cited by the Eighth Circuit for support did not actually

involve claims under an individual conversion policy.* And then

‘Howard v. Gleason Corp., 901 F.2d 1154 (2nd Cir. 1990), did not involve

rights under a conversion policy, but the dispute was about the exercise of the

right to convert. In Klosterman v. Western General Management, Inc., 805

F.Supp. 570 (N.D. Ill. 1992), the issue likewise had to do with a right to

convert, no policy ever having been issued. In Beal v. Jefferson-Pilot Inc.

Co., supra, the issue was whether there was “fraud in the inducement” to

cause Mr. Beal to exercise his conversion right, not to claims made under a

conversion policy after it had been issued.

a Send

the Department of Labor added policy considerations that peti-

tioner as well alluded to in oral argument:

The Secretary’s view is buttressed by important practical

and policy considerations as well. Implicit in [the Eighth

Circuit’s] holding is that a multitude of conversion policies

currently in the hands of policyholders are subject to

regulation under ERISA. If true, this could include ERISA’s

provisions relating to reporting, disclosure, and fiduciary

responsibility. See, e.g., 29 U.S.C. §§ 1021-1024, 1101-

1108. If [the Eighth Circuit’s] holding means that each

policy is a plan, then some fiduciary could be responsible

for carrying out ERISA’s requirements as to each and every

policy. Even if the [Eighth Circuit’s] holding means that

the conversion policies are deemed parts of the underlying

plan from which they were converted, the fiduciaries of

those plans might have to engage in reporting and disclo-

sure activities that reflect not only the terms of the current

plan, but of each and every permutation of “plan” terms as

they exist in various conversion policies held by former

employees. For example, summary plan descriptions de-

scribing current terms of many plans would likely be

inaccurate as to persons holding various conversion poli-

cies acquired in past years. See 29 U.S.C. §1022.

As it is, employers and plans are none too zealous in meeting

these reporting requirements. See Brustad, Orin D., Perspec-

tive--Health Plans that Don’t Comply with ERISA and the Code-

-What, Me Worry? 10 Benefits Law Journal No.4 (Winter 1997),

1-5

The Department then went on to observe yet another serious

problem with the Eighth Circuit’s view that the benefit plan

continues no matter that the employer would like to walk away:

wine WE ate

Moreover, attaching ERISA responsibilities to conver-

sion policies would have serious consequences for employ-

ers who now enjoy the right to terminate welfare plans at

will, absent contractual vesting or other special circum-

stances. See, e.g., Barker v. Ceridian Corp., 122 F.3d 628,

... (8th Cir. 1997). If ERISA responsibilities continue as

to conversion policies even after a plan has been termi-

nated, then such employers will find it more difficult to end

their ERISA responsibilities by welfare plan termination.

[footnotes omitted]

The Department of Labor objected to the regulatory burdens

“given Congress’ repeated admonitions that insurance regula-

tion is to be left primarily to the states. See, e.g., 29 U.S.C.

§ 1 144(b)(2) (ERISA preemption insurance ‘savings’ clause); 15

U.S.C. §§ 1011, et seq. (McCarran-Ferguson Act).” All these

serious problems suggest reason for this Court to grant the writ.

CONCLUSION

For the foregoing reasons, the foregoing petition for writ of

certiorari should be granted.

Respectfully submitted,

S. SHELDON WEINHAUS

Counsel of Record

WEINHAUS and DOBSON

906 Olive Street, Suite #900

St. Louis, Missouri 63101

(314)621-8363

Attorneys for Petitioner

APPENDIX

APPENDIX A

APPEALS FROM THE UNITED STATES

DISTRICT COURT

FOR THE EASTERN DISTRICT OF MISSOURI.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

No. 96-3114

No. 96-3454

ANA PAINTER,

Plaintiff - Appellant,

~

V.

GOLDEN RULE INSURANCE COMPANY,

Defendant - Appellee.

Submitted: April 14, 1997

Filed: August 14, 1997

Before LOKEN, JOHN R. GIBSON, and MAGILL, Circuit

Judges.

LOKEN, Circuit Judge.

Ana Painter claimed health insurance benefits under a conver-

sion policy issued by Golden Rule Insurance Company (“Golden

Rule’). Golden Rule denied coverage on the ground that Painter’ s

cancer treatments were experimental and not medically neces-

sary. The resulting dispute has now spawned two appeals with-

out resolving the coverage question. In No. 96-3114, Painter

appeals the district court’s' dismissal of her state law claims for

‘The HONORABLE GEORGE F. GUNN, JR., United States District

Judge for the Eastern District of Missouri.

iin gle

malicious prosecution and breach of fiduciary duty as preempted

by the Employee Retirement Income Security Act (“ERISA”),

29 U.S.C. § § 1001 et seg. In No. 96-3454, Painter appeals the

amount of attorney’s fees awarded after Golden Rule’s declara-

tory judgment action was dismissed because the parties had not

exhausted their contractual remedies. We affirm both decisions.

I. Background.

In 1991, Golden Rule paid Painter’s claims for ovarian cancer

medical treatments under a group policy purchased by her

employer, M.D. Care, Inc. The group policy was part of an

employee welfare benefit plan governed by ERISA. After

Painter’s cancer went into remission, she requested that the

group policy cover high dose chemotherapy and peripheral stem

cell infusion treatments. Golden Rule denied that request. Painter’s

employment with M.D. Care terminated in August 1992; her

continuation coverage under the group policy terminated in

February 1993, when M.D. Care canceled the group policy. At

that point, Painter exercised her “health insurance conversion

privilege” under the group policy and purchased an individual

“Conversion Policy” from Golden Rule.’

The First Lawsuit. Painter then proceeded with high dose che-

motherapy cancer treatment and submitted a claim for those

expenses under the Conversion Policy. Golden Rule denied

coverage on the ground that this treatment was experimental and

?The Consolidated Omnibus Budget Reconciliation Act of 1985 amended

ERISA to require most sponsors of ERISA group health plans to provide

“continuation coverage” upon termination of employment, see 29 U.S.C. §§

1161-63, and to provide “the option of enrollment under a conversion health

plan otherwise generally available [to employees] under the plan,” § 1162(5).

The parties assume that M.D. Care was required to provide Painter’ s continu-

ation and conversion benefits. That assumption does not affect our resolution

of the issues presented by these appeals. See Glass v. United of Omaha Life

Ins. Co., 33 F.3d 1341, 1343-45 (11th Cir. 1994).

— * 7

not medically necessary. When Painter threatened to assert a

variety of legal claims, Golden Rule commenced a declaratory

judgment action in federal court, seeking a declaration that it is

not obligated under the Conversion Policy to pay Painter’s

claims for these additional cancer treatments. After Painter

moved to dismiss on a variety of grounds, Golden Rule conceded

that the parties had not exhausted the Conversion Policy’s

procedure for determining medical necessity. The district court

then dismissed the declaratory judgment action without preju-

dice, ordering Golden Rule to pay Painter’s “reasonable attorney’

fees and costs incurred in defending this action.” Painter applied

for an award of $102,619.75 in attorney’s fees and now appeals

the district court’s award of $37,493.35 (our case No. 96-3454).

The Second Lawsuit. In December 1995, without exhausting the

Conversion Policy’s medical necessity procedures, Painter com-

menced an action in state court, seeking compensatory and

punitive damages under state law on the theory that Golden

Rule’s actions in denying coverage and commencing the de-

claratory judgment action constituted malicious prosecution and

breach of fiduciary duty. After Golden Rule removed the action,

the district court granted Golden Rule’s motion to dismiss,

concluding that “‘a conversion policy obtained by an employee

pursuant to an ERISA plan is within the scope of ERISA, and

state law claims relating to the conversion policy are subject to

ERISA’s preemption provision.” Painter appeals (our case No.

96-3114). We review an ERISA preemption ruling de nova. See

Arkansas Blue Cross & Blue Shield v. St. Marv’s Hosp., Inc.,947

F.2d 1341, 1344 (8th Cir. 1991), cert. denied, 504 U.S. 957

(1992).

11. No. 96-3114 — The ERISA Preemption Issue.

Painter argues that ERISA does not preempt her state law

claims because the Conversion Policy is an individual contract

that does not implicate administration of M.D. Care’s group

sat Me shi

health plan. After M.D. Care terminated the group policy,

Golden Rule had no relationship with M.D. Care or its ERISA

plan. Therefore, Painter concludes, her state law claims do not

“relate to” M.D. Care’s plan within the meaning of ERISA’s

express preemption provision, 29 U.S.C. § 1144(a), and those

claims should avoid ERISA preemption like the malicious

prosecution claim in Nill v. Essex Group, Inc., 844 F. Supp.

1313, 1318-20 (N.D. Ind. 1994).

The Supreme Court has decided sixteen ERISA preemption

cases since the statute was enacted in 1974. See California Div.

of Labor Stds. Enforcement v. Dillingham Constr., N.A., Inc.,

117 S. Ct. 832, 842-43 (1997) (Scalia, J., concurring). Most

involved the proper scope of “relate to” preemption under §

1144(a), and the Court has struggled, particularly in its more

recent decisions, with the inherent vagueness of that key statu-

tory phrase. Compare New York State Conf. of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1676-80

(1995), with Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 739 (1985). However, some ERISA cases involve the

distinct question of conflict preemption — whether a state law is

preempted because it conflicts with a specific portion of the

complex ERISA statute. If there is a conflict, state law is

preempted, whether or not “the statutory phrase ‘relate to’

provides further and additional support for the pre-emption

claim.” Boggs v. Boggs, 117 S. Ct. 1754, 1761 (1997). In our

view, this is a case of conflict preemption.

To define the conflict between ERISA and Painter’s state law

claims, we must address an underlying legal issue — if Golden

Rule denies Painter’s claim for medical benefits after the Con-

version Policy’s contractual remedies have been exhausted,

would a suit by Painter for wrongful denial of benefits be

governed by ERISA’s remedial provisions? In Pilot Life Ins. Co.

v. Dedeaux, 481 U.S. 41, 43 (1987), the Supreme Court held that

a ne

ERISA remedies preempt “state common law tort and contract

actions asserting improper processing of a claim for benefits

under an insured employee benefit plan.” The Court explained:

The deliberate care with which ERISA’s civil enforce-

ment remedies were drafted and the balancing of policies

embodied in its choice of remedies argue strongly for the

conclusion that ERISA’s civil enforcement remedies were

intended to be exclusive. This conclusion is fully confirmed

by the legislative history of the civil enforcement provision.

Id. at 54. See also Ingersoll-Rand Co. v. McClendon, 498 U.S.

133, 142-45 (1990); Kuhl v. Lincoln Nat’! Health Plan of Kansas

City, 999 F.2d 298, 302-04 (8th Cir. 1993), cert. denied, 510 U.S.

1045 (1994). Thus, if ERISA provides Painter remedies for the

wrongful denial of Conversion Policy benefits, then her state law

claims for tortious mishandling of her benefit claim are conflict-

preempted.

We conclude that Painter’s claim for benefits under the

Conversion Policy is governed by ERISA. The issue turns on

three statutory provisions. First, the ERISA provision governing

claims for plan benefits, 29 U.S.C. § 1132(a)(1)(B), provides

that an ERISA “participant” may sue “to recover benefits due to

him under the terms of his plan.” Second, the definition of

“participant” in 29 U.S.C. § 1002(7) includes “any employee or

former employee of an employer . . . who is or may become

eligible to receive a benefit of any type from an employee benefit

plan.” (Emphasis added.) In other words, a former employee

such as Painter may be an ERISA participant entitled to sue for

benefits under § 1132(a)(1)(B).

That leaves the question whether Painter’s Conversion Policy

benefits are “due [her] under the terms of [her] plan” within the

meaning of § 1132(a)(1)(B). ERISA defines an “employee

welfare benefit plan,” such as M.D. Care’s group health plan, to

a ee

mean “any plan, fund, or program . . . established or maintained

by an employer . . . for the purpose of providing for its partici-

pants . . . through the purchase of insurance or otherwise, (A)

medical, surgical, or hospital care or benefits.” 29 U.S.C. §

1002(1). The group health policy M.D. Care purchased from

Golden Rule either was itself an ERISA plan, or was part of a

broader plan if M.D. Care’s total plan or program included other

components. A suit to recover benefits due Painter under that

group policy, including continuation benefits due her as a former

employee, would be governed by § 1132(a)(1)(B). Here, of

course, the group policy has expired, and Painter is seeking

medical benefits under Golden Rule’s separate Conversion

Policy. But the Conversion Policy came into being as a result of

Painter exercising her right under the group policy to obtain this

specific insurance policy. Thus, the right to a Conversion Policy

was part of the plan or program “established” by M.D. Care to

provide medical benefits for its current and former employees.

As such, the Conversion Policy is a component of M.D. Care’s

ERISA plan. A suit to recover Conversion Policy benefits is

governed by § 1132(a)(1)(B).

Because Painter’s underlying claim for Conversion Policy

benefits is governed by ERISA, her state law claims for Golden

Rule’s alleged mishandling of that claim are preempted under

Pilot Life. This conclusion is consistent with the overwhelming

majority of preemption decisions involving conversion policies

and the ERISA plans which gave them birth. See Peterson v.

Amencan Life & Health Ins. Co., 48 F.3d 404, 407-08 (9th Cir.),

cert. denied, 116 S. Ct. 377 (1995); Glass v. United of Omaha

Life, 33 F.3d at 1346-47; Greany v. Western Farm Bureau Life

Ins. Co., 973 F.2d 812, 817 (9th Cir. 1992); Howard v. Gleason

Corp., 901 F.2d 1154, 1157-58 (2d Cir. 1990); Reynolds v.

Massachusetts Cas. Ins. Co., 900 F. Supp. 915, 922 (E.D. Tenn.

1995), rev'd on other grounds, 113 F.3d 1450 (6th Cir. 1997);

Klosterman v. Western Gen. Mgmt., Inc., 805 F. Supp. 570, 573-

po

74 (N.D. III. 1992); Beal v. Jefferson-Pilot Life Ins. Co., 798 F.

Supp. 673, 677 (S.D. Ala. 1992); Nechero v. Provident Life &

Accident Ins. Co., 795 F. Supp. 374, 379-80 (D.N.M. 1992);

Mays v. Unum Life Ins. Co. of America, 1995 WL 317102, 3

(N.D. Ill. 1995); but see Mimbs v. Commercial Life Ins. Co., 818

F. Supp. 1556, 1562-63 (S.D. Ga. 1993). The district court

correctly concluded that ERISA preempts Painter’s state law

claims.

III. No . 96-3454 — The Attorney Fee Issue.

When Golden Rule filed its declaratory judgment action, Painter

moved to dismiss on many grounds, including (i) ERISA does

not govern claims under the Conversion Policy, (ii) in any event,

ERISA does not afford Golden Rule standing to seek a declara-

tory judgment construing the Conversion Policy,’ and (iii) fail-

ure to exhaust the Policy’ s procedure for an independent

determination of what is medically necessary. Golden Rule

promptly admitted lack of exhaustion and moved to stay or

voluntarily dismiss its declaratory judgment action for this

purpose. Painter instead urged the court to dismiss for lack of

subject matter jurisdiction.

After moving the case toward trial for one year, the district court

referred the pending stay and dismissal motions to a magistrate

judge, who recommended that the court (i) voluntarily dismiss

the action under Fed. R. Civ. P. 41(a)(2) for failure to exhaust

contract remedies, and (ii) order Golden Rule to pay Painter’s

reasonable costs and attorney fees because it had filed a prema-

ture declaratory judgment action. The district court adopted that

recommendation, granted Golden Rule’s voluntary dismissal

motion, dismissed the case without prejudice, and ordered Golden

Rule to pay Painter’s “reasonable attorney’s fees and costs

*Though this issue is not before us, we refer the interested reader to the

thorough discussion and contrary conclusion in Connecticut Gen. Life Ins.

Co. v. Cole, 821 F. Supp. 193, 196-98 (S.D.N.Y. 1993).

— *

incurred in defending this action.” However, while the court’s

Order dismissed the action pursuant to Rule 41(a)(2), its accom-

panying Memorandum declared that it “lacks subject matter

jurisdiction over this case, as applicable [contract] remedies

have not been exhausted.”

Counsel for Painter then applied for an award of $102,619.75 in

attorney fees. Golden Rule argued that the court had no power to

award attorney fees after dismissing for lack of subject matter

jurisdiction. Recognizing its prior error, the court ruled that

failure to exhaust contract remedies is not a jurisdictional defect

depriving the court of power to condition voluntary dismissal on

the payment of Painter’ s reasonable attorney fees. After solic-

iting further billing information from Painter’s attorneys, the

court concluded that much of the fee request was excessive under

Rule 41(a)(2) standards. See generally Kern v. TXO Prod. Corp.,

738 F.2d 968, 972-73 (8th Cir. 1984). The court awarded Painter

fees of $37,493.35. She appeals that award.

Paiater’s argument on appeal is virtually incoherent. Appar-

ently, she argues that the district court’s initial voluntary dis-

missal order was a final order making Painter a prevailing party

under ERISA, that the order stated she would be paid all her

attorney fees, that she therefore gave up her right to appeal the

order, and that the district court’s subsequent order reducing her

fees was contrary to this law of the case. The argument has many

fatal flaws. First, it is not clear from the record on appeal that the

district court’s initial voluntary dismissal order was a final order,

and Painter made no effort to clarify that issue, then or now.

Second, Painter was not a prevailing party under ERISA. As Part

II of this opinion makes clear, the district court properly denied

her motion to dismiss for lack of ERISA subject matter jurisdic-

tion. We also reject Painter’ s suggestion that dismissal of Golden

Rule’s declaratory judgment action was inevitable. The district

court never considered Golden Rule’s alternative motion to stay

the action while contract remedies were exhausted; had Golden

a. pm

Rule pressed that point after the court corrected its subject matter

jurisdiction ruling, a stay might have been granted. Finally, the

district court’s initial order expressly stated that it was dismiss-

ing under Rule 41(a)(2); if Painter’s attorneys construed that

order as authorizing a fee award on some other basis, they have

only themselves to blame.

For these reasons, we find no error of law in the district court’s

analysis of the Rule 41 (a)(2) attorney fee issue. After careful

review of the record, we conclude that the court did not abuse its

considerable discretion in reducing Painter’s initial fee request.

IV. Conclusion.

Painter concludes her brief in No. 96-3114 by suggesting that if

her state law claims are preempted by ERISA, the district court

erred in not granting her leave to amend her complaint to assert

new claims under ERISA. Painter never made this request to the

district court, either before or after that court ruled on the

preemption issue. Even now, she does not advise this court what

ERISA claims she wishes to assert. In the first lawsuit, Painter

fought Golden Rule’s declaratory judgment action in the district

court for nearly three years without asserting ERISA claims of

her own.* We ordinarily do not consider issues raised for the first

time on appeal. See Miller v. Federal Emergency Mgmt. Agency,

—_—_—

‘Painter's challenge to Golden Rule’s declaratory judgment action is one

of many roadblocks her attorneys have erected to avoid prompt resolution of

the Conversion Policy coverage issue that is the core of this dispute. We think

it deplorable that the coverage issue is not yet ripe for decision. But because

this is the result of Painter's litigation strategy, we will refrain from attacking

the resulting impasse sua sponte.

—

57 F.3d 687, 689 (8th Cir. 1995). Painter has given us no good

reason to depart from this practice here.

The judgments of the district court are affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

—A-ll—

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No 96-3114/3454EMSL

Order Denying Petition for

Rehearing and Suggestion

for Rehearing En Banc

Ana Painter,

Appellant,

V.

Golden Rule Insurance Company,

Appellee.

The suggestion for rehearing en banc is denied. The petition for

rehearing by the panel is also denied. The Secretary of Labor’s

amicus brief is rejected for untimely filing.

November 17, 1997

Order Entered at the Direction of the Court

BY:/s/ MICHEAL E. GAINS

Clerk, U.S. Count of Appeals, Eighth Circuit

— A-12 —

APPENDIX C

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

No. 4:96CV00249 GFG

ANA PAINTER,

Plaintiff(s),

VS.

GOLDEN RULE INSURANCE COMPANY,

Defendant(s).

MEMORANDUM AND ORDER

This matter is before the Court on defendant’s motion to dismiss,

for a more definite statement or to strike. Ana Painter, a Missouri

resident, filed a two-count action in Missouri state court against

Golden Rule Insurance Co., an Illinois corporation, for mali-

cious prosecution and breach of fiduciary duty. Painter alleged

that the wrongful filing and prosecution by Golden Rule of an

action in this Court seeking a declaration that it was not liable for

certain medical expenses incurred by Painter caused her dam-

ages in the form of attorney’s fees in defending the action, and

emotional distress. Painter sought compensatory damages of

$25,000 and punitive damages “in excess of $25,000” in each

count.

Golden Rule removed the action to this Court based on federal

question jurisdiction on the ground that the claims relate to an

employee benefit plan under the Employee Income Security Act

(ERISA), 29 U.S.C. § 1002(1). Golden Rule asserted that the

action was also removable based on diversity jurisdiction.

— A-13 —

The record establishes the following. As anemployee of M.D.

Care, Inc., Painter was covered by a group accident and sickness

insurance policy issued by Golden Rule. In December 1991

Painter submitted claims under this policy for the treatment of

ovarian cancer; Golden Rule paid these claims. In June and

October 1992, while in remission, Painter sought pre-certifica-

tion of coverage for high dose chemotherapy and peripheral stem

infusion (psi). Golden Rule denied the precertification request.

When the M.D. Care, Inc., policy terminated on February 1,

1993, Painter exercised her contractual right of conversion and

purchased from Golden Rule an individual policy. In March

1993 Painter incurred medical expenses and submitted claims

under the conversion policy for the high dose chemotherapy and

psi treatment of ovarian cancer.

On September 1, 1993, Golden Rule filed a declaratory

judgment action in this Court,' cause no. 4:93CV2069, against

Painter seeking a declaration that it was not liable for these

expenses under the original policy because it was not in force

when the expenses were incurred, or under the conversion policy

because the terms of that policy (“medically necessary”) ex-

cluded such expenses. Golden Rule asserted that the action arose

under ERISA. Thereafter Golden Rule filed a first amended

complaint which eliminated reference to ERISA. On November

5, 1993, Painter moved to dismiss the amended complaint on the

ground that Golden Rule failed to plead any basis for subject

matter jurisdiction. She argued that the Declaratory Judgment

Act did not provide an independent ground for jurisdiction and

Golden Rule had no standing to bring an action under ERISA.

She argued in the alternative that the action should be dismissed

because Golden Rule did not exhaust internal plan administra-

tive procedures (to determine the question of medical necessity),

as required by ERISA.

'The Honorable Charles A. Shaw.

so

On December 13, 1993, Golden Rule filed a motion for a

temporary stay of proceedings or voluntary dismissal in light of

the failure to exhaust the administrative procedure noted by

Painter. By order dated January 31, 1995, the Court granted

Golden Rule’s request for voluntary dismissal, conditioning

dismissal upon Golden Rule paying Painter’s reasonable

attorney’s fees and costs.’ The issue of attorney’s fees was

pending when Painter filed the present action on December 27,

1995, and is still pending.

In the motion now before the Court, Golden Rule argues that

the state law claims should be dismissed as preempted by

ERISA. Alternatively, Golden Rule argues that to the extent the

allegations in the complaint may be construed to state an ERISA

claim, Painter should be required to provide a more definite

statement of such claim and eliminate remedies, such as dam-

ages for emotional distress and punitive damages, not available

under ERISA. Riser responds that the prior suit filed by Golden

Rule was not an ERISA action and that the present action is not

preempted by ERISA because it does not require interpretation

of any plan document as to whether Painter is or is not entitled

to a benefit.

ERISA’S preemption provision, 29 U.S.C. § 1144(a), pro-

vides in relevant part that “the provisions of this subchapter . . .

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

or hereafter relate to any employee benefit plan.” A state law

“relates to” an employee benefit plan “if it has a connection with

or reference to such a plan.” Fort Halifax Packing Co. v. Coyne,

482 U.S. 1, 8 (1987). ERISA’s preemption language is “con-

?The Court stated that it lacked subject matter jurisdiction because of the

failure to exhaust administrative remedies. In a subsequent order dated

August 24, 1995, on the question of the Court’s authority to impose attorney’s

fees against Golden Rule, the Court noted that it had erred in stating it lacked

subject matter jurisdiction

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spicuous in its breadth.” Robinson v. Linomaz, 58 F.3d 365, 370

(8th Cir. 1995) (quoted case omitted).

A conversion policy obtained by an employee pursuant to an

ERISA plan is within the scope of ERISA, and state law claims

relating to the conversion policy are subject to ERISA’s preemp-

tion provision. Greany v. Western Farm Bureau Life Ins. Co.,

973 F.2d 812, 8!7 (9th Cir. 1992). The Court concludes that the

two state law claims asserted by Painter relate to the original

policy and the conversion policy and are thus preempted. Under

Missouri law, recovery for malicious prosecution requires proof

that the defendant lacked probable cause for commencing an

action against the plaintiff; probable cause for initiation of an

action includes a reasonable belief that the claim may be valid

under applicable law. Neal v. Sparks, 773 S.W.2d 481, 488 (Mo.

Ct. App. 1989). Here such a determination would necessarily

require an analysis of the insurance policy terms.

The breach of fiduciary duty claim is similarly related to the

policies. See, e.g., Kuhl v. Lincoln Nat’l Health Plan, 999 F.2d

298 (8th Cir. 1993). The fact that ERISA may not provide acause

of action because the defendant is not a fiduciary under the terms

of the statute does not limit the scope of ERISA preemption.

Robinson vy. Linomaz, 58 F.3d at 370.

Accordingly,

IT IS HEREBY ORDERED that defendant’s motion to dis-

miss the complaint is granted.

IT IS FURTHER ORDERED that any pending motions are

denied as moot.

Dated this 8th day of July, 1996.

By:/s/ George F. Gunn, Jr.

GEORGE F. GUNN, JR

UNITED STATES DISTRICT JUDGE

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APPENDIX D

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

No. 4:96CV00249 GFG

ANA PAINTER,

Plaintiff(s),

VS.

GOLDEN RULE INSURANCE COMPANY,

Defendant(s).

JUDGMENT

Pursuant to the Memorandum and Order filed herein this day,

IT IS HEREBY ORDERED, ADJUDGED AND DECREED

that plaintiff's complaint is dismissed.

Dated this 8th day of July, 1996..

By:/s/ George F. Gunn, Jr.

GEORGE F. GUNN, JR

UNITED STATES DISTRICT JUDGE

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