Petition for Writ of Certiorari — Bank of Louisiana v. Aetna US Health (No. 06-976)

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Suprem

No. 06-975 jon 16 2007

IN THE OPFICE OF THE CLERK

Supreme Court of the United States

BANK OF LOUISIANA, PETITIONER

AETNA US HEALTHCARE, INC. AND AETNA LIFE

INSURANCE COMPANY

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES CIRCUIT COURT OF APPEALS

FOR THE FIFTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

Henry L. Klein

Counsel of Record

S844 Baronne Street

New Orleans, LA 70113-1103

(504) 586-997 1

CURRY & TAYLOR @ WASH O.C. @ (202) 223-3160 ® USSCINFO.COM

~ _—

QUESTIONS PRESENTED

1. Does ERISA preempt the petitioner’s state

claims for breach of contract against Aetna, its stop-loss

insurance carrier, for failing to honor a written promise to

reimburse the petitioner for employee claims it paid

under its self funded benefit plan during the three-month

“run-out” period covered by the stop-loss insurance it

purchased from Aetna?

2. Should this Court resolve the split of opinion

among the federal courts about whether an employer’s

state law claims against its stop-loss insurance carrier

seeking to enforce the stop-loss insurance agreement are

preempted by ERISA?

3. Should this Court construe the provisions of

ERISA to allow for an award of compensatory damages

to an employer when its stop-loss insurance carrier

through malfeasance, negligence or deliberate choice

breaches the stop-loss insurance agreement to reimburse

the employer for the employee benefit claims it paid

during the three-month “run-out” period?

4. Should small and medium-size businesses who

purchase stop-loss insuranee-for their fully self funded

employee benefit plans have the right to enforce its

provisions by bringing state law claims against the stop-

loss insurance carrier?

TABLE OF CONTENTS

Page

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OPINIONS BELOW

APPENDIX

Fifth Circuit Court of Appeals Opinion

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Fifth Circuit Court of Appeals Opinion on

Rehearing

TABLE OF AUTHORITIES

CASES

AETNA HEALTH INC. V. DAVILA, 542 U.S. 200, 222-

224(2004)

BILL GRAY ENTERPRISES, INC. EMP. H. & W. V.

GOURLEY, 248 F.3D 206, 213-214(3"° CIR. 2001)

CALIFORNIA DIV. OF LABOR STAND. ENF. V.

DILLINGHAM CONSTRUCTION, N.A., INC., 519 U.S.

316 (1997)

CICIO V. DOES, 321 F. 3D 83, 106-110(2D CIR 2003)

COMPUTER AIDED DESIGN SYSTEMS V. SAFECO

LIFE INS., 235 F. SUPP. 2D 1052, 1057(S.D. IOowA

2002

DIFELICE V. AETNA US HEALTHCARE, 346 F. 3D

442, 459(3*° CIR. 2003)

GEWEKE FORD V. ST. JOSEPH'S OMNI PREF. CARE,

INC., 180 F.3D 1355, 1359-1360(9™ CIR. 1997)

FMC CorpP. HOLLIDAY, 498 U.S. 52, 58(1990)

GREAT WEST LIFE & ANNUITY INS. Co. V.

KNUDSON, 534 U.S. 204, 210-215(2002)

MERTENS V. HEWITT ASSOCIATES, 508 U.S. 248, 360-

261(1993)

METROPOLITAN LIFE INS. Co. V. MASSACHUSETTS,

471 U.S. 724, 739-743(1985)

NORTHERN GROUP SERVS., INC. V. AUTOMOBILE

OWNERS INS. CO., 883 F.2D 85, 91(6™ CIR. 1987). ......... 20-21

NORTHERN KARE FACILITIES V. BENEFIRST, LLC,

344 F. SUPP. 2D 283, 286-289(D. MAS.. 2004)

OUTSOURCING, INC. V. COMMERCE BENEFITS

GROUP AGENCY, INC., 54 F. SUPP. 2D 566,

573(W.D.N.C 1999)

PILOT LIFE INS. Co. V. DEDEAUX, 481 U.S. 41,

48(1987)

SENECA BEVERAGE CORP. V. HEALTHNOW OF NEW

YORK, 383 F. SUPP.2D 413 (W.D.N.Y. 2005)

SHAW V. DELTA AIRLINES, INC., 463 U.S. 85, 98(1983) 17

THOMPSON V. TALQUIN BLDG. PRODUCTS CoO., 928

Fe Be Ce Gis TED sicctecescitisvnincninnitntnncaanrinetinnannnsins 21

TRI-STATE MACH., INC. V. NATIONWIDE LIFE INS.

CO., 33 F.3D 309, 31K(4™ CIR. 1994). ....ccsccscsscsvcsvrsrsvecersovensees 21

UNION HEALTH CARE, INC. V. JOHN ALDEN LIFE

INS. CO., 908 F. SUPP. 429, 481(S.D. MISS. 1995)

WORKFORCE DEVELOPMENT V. CORPORATE BEN.

SERVICES, 316 F. SUPP.2D 854, 858(D. MINN. 2004)

STATUTES

28 U.S.C. SECTION 1254(1)

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29 U.S.C. SECTION 1001

29 U.S.C. SECTION 1001(B)

BF as EE IE) srericcssnuinsnsieinintccsesatnistiniuansnsncsebuieeniica 3

29 U.S.C. SECTIONS 1109

29 U.S.C. SECTION 1132(A)(1)-(5)

29 U.S.C. SECTION 1144

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29 U.S.C. SECTION 1132(A)(3)

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29 U.S.C. SECTION 1144(B)(2)(B)

LA. REV. ST. SECTION 22:657

LA. REV. STAT. 22:657(A)

LA. REV. ST. SECTION 22:658

LA. REV. STAT. 22:658(A)(1)

OPINIONS BELOW

The published opinion of the Court of Appeals

for the Fifth Circuit in Bank of Louisiana v. Aetna US

Healthcare, Inc. and Aetna Life Insurance Company,

Docket No. 04-30986, reported at 459 F.3d 610 and filed

on August 4, 2006, reversing the District Court’s entry

of summary judgment against the petitioner, is set

forth in the Appendix hereto(App. 1-15).

The unpublished Order and Reasons of the

United States District Court for the Eastern District of

Louisiana, in Bank of Louisiana v. Aetna US

Healthcare, Inc. and Aetna Life Insurance Company,

Civil Action No. 02-236, dated September 8, 2004,

granting the respondent’s motion for summary

judgment, is set forth in the Appendix hereto(App.16-

21).

The unpublished Order and Reasons of the

United States District Court for the Eastern District of

Louisiana, in Bank of Louisiana v. Aetna US

Healthcare, Inc. and Aetna Life Insurance Company,

Civil Action No. 02-236, dated July 9, 2003, dismissing

the petitioner’s state law claims as preempted under

ERISA, is set forth in the Appendix hereto(App. 22-

29).

The unpublished opinion of the Court of Appeals

for the Fifth Circuit in Bank of Louisiana v. Aetna US

Healthcare, Inc. and Aetna Life Insurance Company,

Docket No. 04-30986, filed on October 18, 2006, in

response to the respondent’s petition for rehearing,

withdrawing the prior panel opinion and substituting a

new opinion qualifying its earlier reversal of the

District Court’s entry of summary judgment against

the petitioner, is set forth in the Appendix hereto(App.

30-44).

JURISDICTION

The final opinion of the United States Court of

Appeals for the Fifth Circuit reversing in part the

District Court’s entry of summary judgment against

the petitioner was entered on October 18, 2006(App.

30).

This petition for writ of certiorari by the

Petitioners is filed within ninety (90) days of that date.

28 U.S.C. Section 2101(c).

The jurisdiction of this Court is invoked

pursuant to the provisions of 28 U.S.C. Section 1254(1).

RELEVANT PROVISIONS INVOLVED

United States Constitution, Amendment V:

No person shall...be deprived of life, liberty, or

property, without due process of law....

29 U.S.C. Section 1001(b):

(b) Protection of interstate commerce and

beneficiaries by requiring disclosure and

reporting, setting standards of conduct, etc.,

for fiduciaries

It is hereby declared to be the policy of this

chapter to protect interstate commerce and the

interests of participants in employee benefit

plans and their beneficiaries, by requiring the

disclosure and reporting to participants and

beneficiaries of financial and other information

with respect thereto, by establishing standards

of conduct, responsibility, and obligation for

fiduciaries of employee benefit plans, and by

providing for appropriate remedies, sanctions,

and ready access to the Federal courts.

29 U.S.C. Section 1002(1) and 21(a):

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,

or benefits in the event of sickness, accident,

disability, death or unemployment, or vacation

benefits, apprenticeship or other training

programs, or day care centers, scholarship funds,

or prepaid legal services, or

(B) any benefit described in section 186 (c) of this

title (other than pensions on retirement or death,

and insurance to provide such pensions).

(A) Except as otherwise’ provided in

subparagraph (B), a person is a fiduciary with

respect to a plan to the extent

(i) he exercises any discretionary authority or

discretionary control respecting management of

such plan or exercises any authority or control

respecting

management or disposition of its assets,

(ii) he renders investment advice for a fee or

other compensation, direct or indirect, with

respect to any moneys or other property of such

plan, or has any authority or responsibility to do

SO, or

(iii) he has any discretionary authority or

discretionary responsibility in the administration

of such plan. Such term includes any person

designated under section 1105 (c)(1)(B) of this

title.

29 U.S.C. Section 1132(a)(1)-(5) (Section

502 of ERISA):

(a) Persons empowered to bring a civil action

A civil action may be brought—

(1) by a participant or beneficiary—

(A) for the relief provided for in subsection (c) of

this section, or

(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;

(2) by the Secretary, or by a participant,

beneficiary or fiduciary for appropriate

relief under section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates

any provision of this subchapter

or the terms of the plan, or

(B) to obtain other appropriate equitable relief

(i) to redress such violations or

(ii) to enforce any provisions of this subchapter

or the terms of the plan;

(4) by the Secretary, or by a participant, or

beneficiary for appropriate relief

in the case of a violation of 1025(c) of this title;

(5) except as otherwise provided in subsection

(b) of this section, by the Secretary

(A) to enjoin any act or practice which violates

any provision of this subchapter, or

(B) to obtain other appropriate equitable relief

(i) to redress such violation or

(ii) to enforce any provision of this subchapter...

29 U.S.C. Section 1144 (Section 514 of

ERISA):

(a) Supersedure; effective date

Except as provided in subsection (b) of this

section, the provisions 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 1008 (a) of this title and not

exempt under section 1003 (b) of this title. This

section shall take effect on January 1, 1975.

(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.

(B) Neither an employee benefit plan described

in section 1003 (a) of this title, which is not

exempt under section 1003 (b) of this title (other

than a plan established primarily for the purpose

of providing death benefits), nor any trust

established under such a plan, shall be deemed to

be an insurance company or other insurer, bank,

trust company, or investment company or to be

engaged in the business of insurance or banking

for purposes of any law of any State purporting

to regulate insurance companies, insurance

contracts, banks, trust companies, or investment

companies.

Louisiana Rev. Stat. 22:657(A):

All claims arising under the terms of health and

accident contracts issued in this state, except

[accidental death claims], shall be paid not more

than thirty days from the date upon which

written notice and proof of claim, in the form

required by the terms of the policy, are

furnished to the insurer unless just and

reasonable grounds, such as would put a

reasonable and prudent businessman on guard,

exist....Failure to comply with the provisions of

this Section shall subject the insurer to a penalty

payable to the insured of double the amount of

the accident and health benefits due under the

terms of the policy or contract during the period

of delay, together with attorney’s fees to be

determined by the court...

Louisiana Rev. Stat. 22:658(A)(1) & (B)(1):

A. (1) All insurers issuing any type of contract,

other than those specified in R.S. 22:656,

22:657..., shall pay the amount of any claim due

any insured within thirty days after receipt of

satisfactory proofs of loss from the insured or

any party in interest...

B. (1) Failure to make such payment within

thirty days after receipt of such satisfactory

proofs...shall subject the insurer to a penalty, in

addition to the amount of the loss, of fifty

percent damages on the amount found to be due

from the insurer to the insured, or one thousand

dollars, whichever is greater, payable to the

insured, or to any of said employees, or in the

event a partial payment or tender has been

made, fifty percent of the difference between the

amount paid or tendered and the amount found

to be due as well as reasonable attorney’s fees

and costs....

STATEMENT

In 1995, the petitioner Bank of Louisiana (“the

petitioner” or “BOL”) fully self funded its employee

health insurance plan, either by setting aside funds to

satisfy potential claims against the plan or by paying

benefits to plan participants out of BOL’s general

accounts. In order to reduce the risk of substantial

financial loss which attends the self-funding of a health

insurance plan for its employees, the petitioner

purchased from the respondent Aetna Life Insurance

Company, later the respondent Aetna US Healthcare,

Inc. (“the respondent” or “Aetna”’), a form of

reinsurance known as sto~-loss insurance.

Stop-loss insurance is a way for an employer who

self funds a health or other welfare plan _ for its

employees to insure against the risk of excessive

payouts and to limit its consequent liability. It also

levels out the peaks and valleys of the loss experience

and thereby helps to stabilize costs. The stop-loss

contract specifies an effective date, a so-called “run-in”

period immediately prior to the effective date when

claims can be covered and a so-called “run-out” or “run-

off’period immediately after the plan period when

claims can be covered. Coverage may begin once an

individual claim surpasses a high deductible called the

individual stop-loss amount; or when year-to-date

aggregate claims surpass a pre-negotiated amount,

usually 125 percent of actuarially derived expected

losses in aggregate for the plan year, called the

aggregate stop-loss amount.

When the petitioner purchased _ stop-loss

insurance from Aetna in January of 1995, it agreed to

be responsible for the first $50,000 of health-care costs

incurred by any individual employee during the

calendar year with Aetna being responsible for any

claims which exceeded this amount for any individual

employee in a calendar year. In addition, BOL was

responsible for a sum certain in aggregate claims for

the calendar year with Aetna being responsible for any

claims beyond this aggregate amount. Finally, it was

agreed that Aetna would administer BOL’s self-funded

employee benefit plan pursuant to an administrative

services contract.

In the summer of 2000, Aetna announced that it

would no longer provide stop-loss insurance for the

petitioner and it encouraged BOL to cease self funding

its employee benefit plan and instead purchase a fully

insured benefit plan from Aetna for the year 2001, a

purchase which BOL decided to make. In the

meantime, by November of 2000, BOL had reached its

aggregate stop-loss limit in claims and consistent with

the stop-loss insurance it had purchased from Aetna,

Aetna was responsible for any claims beyond this

amount incurred in the year 2000.

Because claims incurred in 2000 but not

presented for_payment until 2001 were not covered by

BOL’s stop-loss insurance with Aetna and in order to

have Aetna pay those claims even though not presented

until 2001, the petitioner on December 1, 2000, paid

Aetna a premium of $36,132.78 to purchase a “tail” to its

stop-loss policy and thereby obligate Aetna to pay “run-

- out” claims under the 2000 plan for three months after

the 2000 stop-loss insurance expired on December 31,

2000.

On December 28, 2000, Aetna’s Account

Manager (Ms. Stacy McMahon) then warranted the

petitioner in writing that BOL would have no further

exposure for claims originating in the year 2000 if it

purchased this “tail” coverage from Aetna. In her letter

responding to the petitioner’s request for written

affirmation of the scope of such coverage, she wrote

BOL:

[pler your request, this is confirmation that the

Bank of Louisiana met the Aggregate Stop Loss

limit for the 2000 contract year. According to

your contract with us, the bank will have no

additional claim liability for 2000 and no

additional fund transfers will be requested.

Beginning January 1, 2001, your runoff [“run-

out”] period will begin, at which time the

monthly budgeting feature will no longer exist.

We will start wiring your account for claims paid

during the runoff period and you will be

reimbursed at year end.

(emphasis supplied).

As an accommodation by BOL and based upon

its understanding that it would be reimbursed for all

these monies at the end of 2001 consistent with Ms.

McMahon’s representations, Aetna was allowed to draft

the petitioner’s account during 2001 in the amount of

$271,628.38 for 2000 claims submitted during the three-

month run-out period, some of which were paid by

Aetna during the run-out period and some of which

were paid by Aetna after the three-month run-out

period had expired. For example, one claim drafted by

Aetna from the petitioner’s account on August 3, 2001,

for $162,347.49 was based on costs incurred by BOL

employee Roberta Swanson who died on January 6,

2001. Her costs were submitted to Aetna for payment

on January 20, 2001, well within the “run-out” period.

Yet Aetna delayed drafting BOL’s account for this

$162,347.49 until August 3, 2001.

At the end of the calendar year 2001, the

petitioner requested Aetna to reimburse it for all the

claims paid as required by the stop-loss insurance

extension coverage or “tail,” as represented in

McMahon’s letter of December 28, 2000, i.e., in the total

amount of $271,628.38. Aetna refused to reimburse the

petitioner this sum of $271,628.38 contending in part

that this “tail” coverage extended only to claims

actually paid during the three-month “run-out” period

ending March 31, 2001, and that most of the claims

comprising this sum of $271,628.38, including

$162,347.49 for Ms. Swanson, were not paid during this

run-out period.

In the wake of Aetna’s refusal to live up to its

obligations under its stop-loss insurance extension

agreement to reimburse fully BOL for the $271,628.38

in claims paid, the petitioner brought this civil action

based on diversity of citizenship in the federal district

court for the Eastern District of Louisiana against

Aetna seeking $271,628.38, interest from January 1,

2000, “and for all general and equitable relief.” Besides

relying upon the facts described herein, BOL alleged

that all of the claims for benefits for which Aetna

drafted its account in 2001 were submitted by the

health care providers in time to have been paid by

Aetna during the three-month run-out period; and that

to the extent that the condition of payment during the

run-out period was not fulfilled, Aetna caused the

nonfulfiliment by unduly delaying the payment of

claims.

BOL’s complaint contained four separate counts

and four separate theories of recovery under state law.

The first count sought the recovery of damages in the

amount of $271,628.38 and alleged that Aetna had

misrepresented the scope of coverage under the stop-

loss insurance extension or “tail” which it purchased

from Aetna for $36,132.78. The second count claimed it

was entitled to damages because it detrimentally relied

on Aetna’s representations about the benefits and

rights under the existing stop-loss insurance policy as

well as the fully-insured coverage which it purchased

from Aetna on January 1, 2001. ;

A third count sought damages for Aetna’s breach

of contract when it failed to reimburse the petitioner

for all claims which were paid or which should have

been paid during the three-month “run-out” period, all

as required by McMahon’s letter of December 28, 2000.

Finally, BOL claimed in a fourth count that it was

entitled to recover $271,628.38 in damages because

Aetna breached its fiduciary duties in administering

BOL’s employee benefit plan when it “delayled]| the

processing of claims in a manner which would take the

claim outside of the run-off period.”

Following Aetna’s answer and discovery, BOL

moved for summary judgment contending that as a

matter of law Aetna was liable under state law

principles of breach of contract, misrepresentation and

estoppel for refusing to perform under the stop-loss

extension insurance agreement which BOL purchased

for $36,132.78 and for refusing to reimburse BOL

$271,628.38 at the end of 2001 for claims submitted

during the three-month run-out period arising from

medical services and costs incurred by BOL’s

employees during 2000. Aetna argued that all of BOL’s

state law claims for relief were preempted by the

Employee Retirement Income Security Act, 29 U.S.C.

Section 1001 et seg. (“ERISA”).

On July 9, 2008, the federal district court,

Berrigan, J., issued an order dismissing all of the

petitioner’s claims against Aetna as preempted by

ERISA(App. 22-29). Mistakenly treating this fully self-

funded employee benefit plan of BOL as a fully insured

employee benefit plan under ERISA and_ then

characterizing the stop-loss insurance coverage which

BOL purchased from Aetna as itself a covered “plan”

within ERISA, she concluded that all of BOL’s state

law claims “relate to” a covered employee benefit plan

for purposes of ERISA’s general preemption clause

contained in 29 U.S.C. Section 1144 (Section 514 of

ERISA)(App. 24-25).

The district judge erroneously found that all of

BOL’s claims address an area of exclusive federal

concern and directly affect the relationship between

traditional ERISA entities, i.e., the employer, the plan

and its fiduciaries:

The parties are two traditional ERISA entities:

the employer and the plan provider. The claims

all pertain to the terms of the ERISA-governed

plan and will require the examination of plan

terms. Such plan interpretation has been found

to be sufficient to warrant ERISA preemption.

(App. 24)(citations omitted). Additionally, the district

court did not believe that BOL’s new claim under La.

Rev. St. Section 22:657 (penalizing an insurer by

doubling the amount of benefits due and awarding

attorney’s fees for its unreasonable delay in paying a

claim), could avoid preemption since it creates an

alternative remedy that is not authorized under

ERISA’s civil enforcement scheme(App. 25-27).

The district judge dismissed BOL’s state law

claims for misrepresentation, detrimental reliance and

violation of La. Rev. St. Section 22:657, as preempted

by ERISA(App. 27). BOL’s other claims for breach of

contract, violations of La. Rev. St. Section 22:658, and

breach of fiduciary duty were dismissed as

abandoned(App. 27). These rulings were postponed for -

ten days in order to allow BOL to amend its

complaint(App. 27-28). BOL did so on July 22, 2003,

adding claims against Aetna for breach of ERISA

fiduciary duty and seeking in a separate count

“equitable relief under ERISA” pursuant to 29 U.S. C.

Sections 1109 and 1132(a)(8).

On September 8, 2004, the same district judge

denied BOL’s motion for declaratory relief and granted

Aetna’s motion for summary judgment on BOL’s new

claims(App. 16-21). Reaffirming its earlier dismissal of

all of the petitioner’s state law claims because of

ERISA preemption, the district court noted BOL’s

acknowledgment that it was seeking legal relief in this

suit, i.e., the award of compensatory damages against

Aetna for breaching its contractual obligation to pay

money(App. 18;19). However, the district judge ruled

that since Section 502 of ERISA (29 U.S.C. Section

1132(a)(3)) provides only equitable—not legal—relief,

the petitioner’s claims must be dismissed (App. 18-20).

BOL appealed both of these decisions by Judge

Berrigan. On August 4, 2006, the court of appeals for

the Fifth Circuit reversed the district judge’s summary

dismissal of BOL’s_ state law _ claims for

misrepresentation, detrimental reliance and breach of

contract and remanded the matter to the district court

for further proceedings. In so ruling, the court of

appeals found that BOL had abandoned any claim that

Aetna had breached its fiduciary duty as plan

administrator in delaying the payment of health care

benefits, a waiver which also caused its claim for

attorney's fees under La. Rev. St. Section 22:657 to

fail(App. 4;11-12).

The gist of its ruling was that BOL’s proof in

support of its state law claims will not invade ERISA’s

exclusive area of federal concern since BOL can recover

on these claims by showing simply that Aetna drafted

its account during the three-month stop-loss extension

period rather than by showing that Aetna delayed

processing these claims as a plan administrator, this

latter evidentiary showing too invasive of the ERISA

relationship to avoid preemption(App. 6-7).

Moreover, the court of appeals determined that

Aetna was acting as a vendor of insurance--- not as an

ERISA plan fiduciary----when it negotiated with BOL

over which claims would be covered by the stop-loss

insurance extension(App. 8). In addition, z

[t]he duties that Aetna has allegedly breached in

negotiating the stop-loss policy were owed to the

Bank, the benefits of stop-loss insurance inure

solely to the Bank, and Aetna cites no evidence

that the stop-loss policy is a plan asset or was

purchased with plan assets.

(App. 8). Finally, the court concluded that an insurance

company selling stop-loss insurance for an ERISA plan

is not necessarily a plan fiduciary and should not be

regulated by ERISA(App. 8-9).

Aetna sought rehearing. On October 18, 2006,

the court filed a substitute opinion(App.30-44). It ruled

that even though Aetna was providing stop-loss

insurance to BOL—not a traditional ERISA-type

employee benefit, to the extent that BOL had to prove

for its breach of contract claim that Aetna in violation

of its duty under the stop-loss extension agreement had

improperly delayed processing and paying benefit

claims under this self funded plan, it was inquiring into

an area of exclusive federal concern and was therefore

preempted by ERISA (App.35-36). Moreover, it ruled

that the only claim of BOL which implicates Aetna’s

role as an ERISA fiduciary is this one for breach of

contract seeking reimbursement for those benefit

claims which Aetna delayed processing and paying

during the three-month “run-out” period(App. 37-38).

Because Aetna had established an ERISA

preemption defense for this breach of contract claim,

the panel remanded the case to the district court for

trial on BOL’s claims of detrimental reliance,

misrepresentation and its breach of contract claim

based upon Aetna’s failure to reimburse BOL for

benefit claims which were actually paid during the

three-month “run-out” period(App. 38-39).

BOL has now brought to this Court its petition

seeking a writ of certiorari to the United States Court

of Appeals for the Fifth Circuit.

REASONS FOR GRANTING THE PETITION

1. There Is A Split of Opinion Among the

Federal Courts About Whether State Law

Claims Seeking To Enforce A Stop-Loss Insurance

Agreement For A Self Funded Employee Benefit

Plan Are Preempted Under ERISA And This Court

Should Resolve The Controversy, Find No

Preemption Under ERISA And Thereby Provide

Small and Medium-Size Businesses Like The

Petitioner With The Actual Insurance Protection

Against Catastrophic Losses They Purchased For

Their Self Funded Plans.

When Congress enacted ERISA in 1974, it

decided to insure uniformity in employee benefit plan

regulation and avoid conflicting and overlapping State

regulation by providing in 29 U.S.C. Section 1144(a),

that “the provisions of this subchapter and subchapter

III of this chapter shall supercede any and all State

laws insofar as they may now or hereafter relate to any

employee benefit plan...."(emphasis supplied). This

language has been broadly interpreted by this Court to

displace any State law or State common law causes of

action which “relate[| to” a benefit plan within ERISA’s

ambit. FMC Corp. Holliday, 498 U.S. 52, 58(1990).

Shaw v. Delta Airlines, Inc., 463 U.S. 85, 98(1983).

While ERISA’s preemptive sweep is expansive,

the Savings Clause contained in 29 U.S.C. Section

1144(b)(2)(A)(“...nothing in this subchapter shall be

construed to exempt or relieve any person from any law

of any State which regulates insurance....”), is stated

almost as broadly. Yet this Court has construed this

language to apply only to state laws regulating core

insurance issues, i.e., only those state laws which

involve_ contractual arrangements for protecting

against financial loss through spreading a policyholder’s

risk, affect an integral part of the policy relationship or

address only entities within the insurance industry

itself. Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 739-743(1985). Thus only a claim based on

state law regulating the core business of insurance as

defined in Metropolitan’s three-part test is “saved”

from preemption by virtue of the Savings Clause of

Section 1144(b)(2)(A), even if it “relates to” an

employee benefit plan within the meaning of Section

1144(a).

ERISA further contains a so-called “Deemer”

Clause which limits the reach of the Savings Clause. 29

U.S.C. Section 1144(b)(2)(B) provides that an employee

benefit plan “shall [not] be deemed to be an insurance

company or other insurer...or to be engaged in the

business of insurance ...for purposes of any law or any

State purporting to regulate insurance companies [or]

insurance contracts....” In FMC Corp. Holliday, 498

U.S. at 61, the Court held that a self funded employee

benefit plan is exempt from state laws which regulate

insurance by virtue of the “deemer clause” but a fully

insured plan remains somewhat regulated by the State

in that the insurance company which insures the plan is

subject to State insurance regulation. /d. In Pilot Life

Ins. Co. v. Dedeaux, 481 U.S. 41, 48(1987), this Court

ruled that the processing of benefit claims was not the

kind of core insurance activity which would be saved

from preemption by the Savings Clause. /d. at 57.

This law favoring broad ERISA preemption has

consistently thwarted State attempts to regulate or

reform welfare benefit plans; and because ERISA itself

brings little substantive regulation to bear upon such

plans, it has “left a sizable regulatory void within which

employers are virtually free to create and administer

their welfare plans as they see fit.” T. Paredes, Stop-

loss Insurance, State Regulation, and ERISA:

Defining the Scope of Federal Preemption, 34 Harv.

Jour. of Leg.233, 239(1997). Coupled with the emergent

trend of more and more small to mid-size businesses

choosing to self fund their employee benefit plans and

then buy stop-loss insurance to minimize any

catastrophic losses, the regulatory vacuum attendant to

these plans is of growing concern to State regulators,

plan sponsors and the public in general.

The present controversy typifies the problem of

no oversight and no legal consequences for stop-loss

insurance providers of self funded benefit plans. The

petitioner paid Aetna $36,132.78 to purchase a “tail” to

its stop-loss policy for its fully self funded plan and

thereby obligated Aetna to pay “run-out” claims under

the 2000 plan for three months after the 2000 stop-loss

insurance expired on December 31, 2000. Instead of

drafting BOL’s account within the “run out” period for

the claims, as it should have, Aetna delayed for months

and then claimed that no reimbursement to BOL was

due since the claims were not paid during the “run-out”

period. The decision below determines that BOL’s state

law breach of contract claim against Aetna is

preempted to the extent that it relies on Aetna’s delay

in processing these claims, the very heart of Aetna’s

bad faith breaching conduct, because such proof would

touch on a traditional ERISA activity, the payment of

claims by the plan administrator.

Yet this is a fully self funded plan by BOL;

Aetna’s administration of the plan is by contract with

BOL, not because Aetna is the plan sponsor. Moreover,

the stop-loss insurance arrangement, exemplified by

Ms. McMahon’s letter, is purely contractual. Neither

the “tail” extension of the stop-loss coverage nor the

promise to reimburse by Aetna has anything to do with

processing claims of beneficiaries to the plan, the

fiduciary duties of administrators to beneficiaries or the

plan’s language, terms or benefits. There were no

breaches of fiduciary duty here, just breaches of

contract by Aetna. BOL’s proof of Aetna’s breach of

contract under state law should be unimpeded by

ERISA preemption and the lower court was wrong to

rule otherwise.

This Court has yet to rule on what effect the

purchase of stop-loss insurance has on the status of a

fully self funded employee welfare plan. In the absence

of any definitive ruling by this Court, the lower federal

courts have come to divergent opinions about whether

state law claims seeking to enforce a stop-loss insurance

agreement for a self funded employee benefit plan are

preempted under ERISA.

Some courts conclude that state law claims

against the stop-loss insurance carrier for breach of the

insurer’s duties under the stop-loss agreement do not

implicate any regulation of the ERISA plan, do not

involve a plan fiduciary, would leave the employer

without a remedy against an entity with no authority to

approve « deny employee claims for benefits and

therefore a.e not preempted by ERISA. Geweke Ford

v. St. Joseph’s Omni Pref. Care, Inc., 180 F.3d 1355,

1359-1360(9" Cir. 1997). Northern Group Servs., Inc. v.

Automobile Owners Ins. Co., 833 F.2d 85, 91(6th- Cir.

1987). Seneca Beverage Corp. v. Healthnow of New

York, 383 F. Supp.2d 413, 423(W.D.N.Y.2005). Northern

Kare Facilities v. Benefirst, LLC, 344 F. Supp. 2d 283,

286-289(D. Mass. 2004). Workforce Development v.

Corporate Ben. Services, 316 F. Supp.2d 854, 858(D.

Minn. 2004). Computer Aided Design Systems v. Safeco

Life Ins., 235 F. Supp. 2d 1052, 1057(8.D. Iowa

2002).Strategic Outsourcing, Inc. v. Commerce Benefits

Group Agency, Inc., 54 F. Supp. 2d 566, 573(W.D.N.C.

1999). Union Health Care, Inc. v. John Alden Life Ins.

Co., 908 F. Supp. 429, 431(S.D. Miss. 1995).

Besides the Fifth Circuit Court of Appeals in

this case, other federal courts have held that the

purchase of stop-loss insurance does not convert a fully

self funded employee benefit plan into an “insured” one

which would avoid ERISA preemption and therefore

all state law claims attending performance of the stop-

loss agreement are preempted under ERISA. Bill Gray

Enterprises, Inc. Emp. H. & W. v. Gourley, 248 F.3d

206, 213-214(3rd Cir.2001). Tri-State Mach., Inc. v.

Nationwide Life Ins. Co., 33 F.3d 309, 315(4th Cir.

1994). Thompson v. Talquin Bldg. Products Co., 928

F.2d 649, 653(4th Cir. 1991).

In order to remedy this confusion among the

federal courts about whether claims such as those BOL

has made against Aetna here for breach of contract are

preempted, this Court should grant the petition and

harmonize these disparate decisions, especially given

the increasing number of small to mid-size businesses

which have chosen to self fund their employee welfare

plan and then purchase stop-loss insurance coverage in

order to avoid catastrophic losses. A decision rejecting

preemption should ensue given the basic principles of

insurance and contract law, the substance and function

of stop-loss insurance and the fact that employers like

BOL who purchase such insurance deserve meaningful

remedies under state law when the insurer fails to live

up its promises.

2. This Court Should Construe ERISA’s Remedies

To Include The Award Of Compensatory Damages

As Restitution For An Employer When Its Stop-

Loss Insurer Fails To Live Up To Its Promises

Contained In The Stop-Loss Insurance Agreement.

In Great West Life & Annuity Ins. Co. v.

Knudson, 534 U.S. 204, 210-215(2002), and Mertens v.

Heuntt Associates, 508 U.S. 248, 360-261(1993), this

Court decided that the “equitable” remedies expressly

provided an ERISA participant or beneficiary does not

include the payment of money as restitution. /d.

This cramped construction of the relief due

complainants under ERISA has produced perverse

results. As Circuit Judge Becker wrote in his

concurring opinion in DiFelice v. Aetna US Healthcare,

346 F. 3d 442, 459(3rd Cir. 2003), the unavailability of

extra-contractual damages renders contingency fees

entirely impractical, discouraging legal help when it is

most needed; makes it inordinately difficult to secure

injunctive relief while encouraging benefit plans to

deny claims in bad faith; and gives some benefit plans

including HMOs “every incentive to act in their own

and not in their beneficiaries’ best interest while

simultaneously making it incredibly difficult for plan

participants to pursue what meager remedies they

possess....” Id. See Cicio v. Does, 321 F. 3d 83, 106-

110(2d Cir. 2003(Calabresi, J., dissenting in part)(lack of

damage award under ERISA leads to unprincipled

analysis in order to-provide relief). In effect, the Court’s

‘construction of ERISA has prevented the very

purposes which ERISA was enacted to promote, i.e.,

the safety, predictability and security of employer

benefit plans.

In a dissenting opinion in Great West Life, 534

U.S. at 224-234, and a concurring opinion in Aetna

Health Inc. v. Davila, 542 U.S. 200, 222-224(2004,

Justice Ginsburg has suggested that Congress intended

that ERISA replicate the core principles of trust

remedy law, including the make-whole standard of

trust restitution which includes money damages. /d. In

addition, Justice Scalia, concurring with Justice

Ginsburg in California Div. of Labor Stand. Enf. v.

Dillingham Construction, N.A., Inc., 519 U.S. 316

(1997), has indicated a willingness to reassess anew the

entire issue of ERISA preemption.

The gaps in ERISA’s statutory law are apparent

and it is now appropriate for this Court to develop new

_ federal common law in order to allow for an award of

compensatory damages to an employer when its stop-

loss insurance carrier through malfeasance, negligence

or deliberate choice breaches the stop-loss insurance

agreement to reimburse the employer for the employee

benefit claims it paid during the stop-loss period. See,

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

101, 110(1989); Pilot Life Ins. Co. v. Dedeaux, 481 U.S.

at 56.

CONCLUSION

For all of the reasons identified herein, a writ of

certiorari should issue to the United States Court of

Appeals for the Fifth Circuit in order to review its

decision and, ultimately, to determine that the resort to

stop-loss insurance for self funded employee benefit

plans does not invoke ERISA preemption and that

even if ERISA relationships are implicated, state law

claims arising from the insurer’s breach of the stop-loss

insurance contract invoke legal remedies including the

award of compensatory damages; or to declare that the

district court possesses the jurisdiction to determine all

of the petitioner’s claims under state law as stated in its

original complaint; or to provide BOL with such other

relief as is fair and just in the circumstances.

Respectfully submitted,

Henry L. Klein

Counsel of Record

844 Baronne Street

New Orleans, LA 70113

(504)586-9971

(any footnotes trail end of each document)

No. 04-30986

UNITED STATES COURT OF APPEALS FOR THE

FIFTH CIRCUIT

BANK OF LOUISIANA,

Plaintiff-Appellant,

versus

AETNA US HEALTHCARE INC; AETNA LIFE

INSURANCE COMPANY,

Defendants-Appellees.

August 4, 2006, Filed

COUNSEL: For BANK OF LOUISIANA, Plaintiff -

Appellant: Henry L. Klein, New Orleans, LA.

For AETNA US HEALTHCARE INC, Defendant -

Appellee: Richard Guy Duplantier, Jr., Galloway,

Johnson, Tompkins, Burr & Smith, New Orleans, LA.

For AETNA US HEALTHCARE INC, Defendant -

Appellee: John Bruce Shely, Kendall Matthew Gray,

Andrews & Kurth, Houston, TX.

For AETNA LIFE INSURANCE CO., Defendant -

Appellee:Richard Guy Duplantier, Jr., Galloway,

Johnson, Tompkins, Burr & Smith, New Orleans, LA.

For AETNA LIFE INSURANCE CO., Defendant -

Appellee:John Bruce Shely, Kendall Matthew Gray,

Andrews & Kurth, Houston, TX.

JUDGES: Before REAVLEY, GARZA, and

BENAVIDES, Circuit Judges. REAVLEY, Circuit

Judge, specially concurring.

OPINION BY: EMILIO M. GARZA

OPINION: EMILIO M. GARZA, Circuit Judge:

The Bank of Louisiana ("the Bank") appeals a summary

judgment for the defendants Aetna US Healthcare and

Aetna Life Insurance (collectively "Aetna"). The issue

on appeal is whether the Bank's state law claims of

detrimental reliance, breach of contract, and

misrepresentation are preempted by the Employee

Retirement Income Security Act, 29 U.S.C. § 1001 et

seq. ("ERISA").

In 1995, the Bank contracted to have Aetna administer

and provide stop-loss insurance for its self-insured

employee benefit plan ("the Plan").' The stop-loss policy

provided an "individual" or "specific stop-loss amount" of

$ 50,000 and an "aggregate stop-loss amount" of $

600,000.2 The stop-loss coverage was scheduled to

terminate on December 31, 2000.

The Bank, however, reached the aggregate stop-loss

amount in 2000. Late in that year, the parties met to

form a new contract that would provide fully-insured

coverage commencing on January 1, 2001. The Bank

also purchased an extension on its stop-loss coverage

that would apply to claims incurred in 2000 and for

which benefits would be paid during the first three

months of 2001. In a letter from account representative

Stacy McMahon, Aetna stated that the stop-loss

extension would mean that the Bank would "have no

additional claim liabilities for 2000 and no additional

fund transfers will be requested." McMahon further

stated that Aetna would "start wiring [the Bank's]

account for claims paid during the runoff period and

[the Bank would] be reimbursed at year-end." During

the three month run-off period, the Bank submitted $

271,628.38 in net claims incurred by plan members in

2000. (R. 177, 181, 218, 248.) Aetna drafted the Bank's

account for these claims over the course of 2001 and

2002. Five of these drafts occurred during the three-

month stop-loss extension period, totaling $ 102,720.06.

Nevertheless, Aetna declined to reimburse the Bank.

The Bank filed a complaint alleging that Aetna had

negligently or fraudulently "misrepresented the value

and benefit of its payment" to Aetna for the stop-loss

policy. In particular, the Bank first claimed that Aetna

misrepresented that, pursuant to the stop-loss policy,

Aetna would reimburse the Bank for the $ 271,628.38

that it drafted from the Bank's account. Second, the

Bank alleged that Aetna had falsely represented that

Aetna would reimburse the Bank for the $ 271,628.38 in

charges and that the Bank had detrimentally relied on

this representation. Third, the Bank alleged that Aetna

had breached a contract to reimburse it for the $

271,628.38 of account drafts. Fourth, the Bank alleged

that Aetna had breached its fiduciary duties as plan

administrator by delaying the processing of claims to

remove them from the stop-loss coverage. Finally, in an

amended complaint, the Bank alleged that Aetna had

violated Louisiana Revised Statutes 22:658* and

22:1220.'

Aetna moved for summary judgment on the ground

that the Bank's claims were preempted by ERISA. Ina

series of briefs, Aetna argued that ERISA preempted

claims between an employer and a plan administrator.

(R. 930.) The Bank responded that its claim of

detrimental reliance and a claim for attorney's fees

under Louisiana Revised Statute 22:657, the latter of

which it had not pled,® were not preempted because

they exclusively involved parties providing services to

an ERISA plan in a non-fiduciary capacity. (R. 635,

882.) The Bank withdrew its breach of fiduciary duty

claim® and abandoned its claims under Louisiana

Revised Statute 22:658 & 22:1220. The district court

held that ERISA preempted all of the Bank's

remaining claims and granted summary judgment for

Aetna.

In reviewing a summary judgment, we apply the same

standard as the district court. Martin v. Alamo

Community Coll. Dist., 353 F.3d 409, 412 (5th Cir.

2003). We affirm only if there is no genuine issue of

material fact and the movant is entitled to judgment as

a matter of law. Jd. For a defendant to obtain summary

judgment on an affirmative defense, it must establish

beyond dispute all of the defense's essential elements.

Id. We review the district court's legal determination

that ERISA preempts a state law claim de novo.

Bullock v. Equitable Life Assurance Soc'y of the

United States, 259 F.3d 395, 399 (5th Cir. 2001).

ERISA's preemption clause, 29 U.S.C. § 1144(a), states

that with certain exceptions, ERISA "shall supersede

any and all State laws insofar as they may now or

hereafter relate to any employee benefit plan... ." The

Supreme Court has "observed repeatedly that this

broadly worded provision is_ ‘clearly expansive.’ "

Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 146,

121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001) (quoting N.Y.

State Conference of Blue Cross & Blue Shield Plans v.

Travelers Ins. Co., 514 U.S. 645, 655, 115 S. Ct. 1671,

131 L. Ed. 2d 695 (1995)). The Court has held that a

state law "relates to an ERISA plan ‘if it has a

connection with or reference to such a plan.’ " Jd. at 147

(quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97,

103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983)).

Simultaneously, however, the Court recognizes that,

given its broadest reading, the phrase "relate to" would

encompass virtually all state law, and that its

"connection with" and "reference to" interpretations are

"scarcely more restrictive." /d. at 146-47. The Court has,

therefore, declined to apply an “uncritical literalism" to

the phrase and instead takes the "the objectives of the

ERISA statute as a guide to the scope of the state law

that Congress understood would survive, as well as to

the nature of the effect of the state law on ERISA

plans.” /d. at 147 (internal quotation marks omitted).

Congress's objectives in enacting ERISA were to

protect interstate commerce and the interests of

participants in employee benefit plans and _ their

beneficiaries, by requiring the disclosure and reporting

to participants and beneficiaries of financial and other

information with respect thereto, by establishing

standards of conduct, responsibility, and obligation for

fiduciaries of employee benefit plans, and by providing

appropriate remedies, sanctions, and ready access to

the Federal courts.

29 U.S.C. § 1001(b). To this end, ERISA's preemption

provision is intended "to establish a _ uniform

administrative scheme, which provides a set of

standard procedures to guide processing of claims and

disbursement of benefits." Kgelhoff, 5382 U.S. at 148

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

9, 107 S. Ct. 2211, 96 L. Ed. 2d 1 (1987)). A uniform

administrative scheme serves to minimize

administrative and financial burdens by avoiding the

need to tailor plans to the peculiarities of the law of

each state. Ingersoll-Rand Co. v. McClendon, 498 U.S

133, 142, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990).

In light of these statutory objectives, this court applies

a two-prong test to the defense of ERISA preemption.

A defendant pleading preemption must prove that: (1)

the claim "addresses an area of exclusive federal

concern, such as the right to receive benefits under the

terms of the Plan; and (2) the claim directly affects the

relationship among traditional ERISA entities--the

employer, the plan and its fiduciaries, and the

participants and beneficiaries." Mayeauax v. La. Health

Serv. and Indem. Co., 376 F.3d 420, 432 (5th Cir. 2004).

Because ERISA preemption is an affirmative defense,

Aetna bears the burden of proof on both elements. See

Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S. Ct.

1542, 95 L. Ed. 2d 55 (1987) (ERISA preemption is a

defense); Settles v. Golden Rule Ins. Co., 927 F.2d 505,

508 (10th Cir. 1991) (defendant bears burden of proving

ERISA preemption); Kanne v. Conn. Gen. Life Ins.

Co., 867 F.2d 489, 492 n.4 (9th Cir. 1988) (same).

Aetna argues that the Bank's claims require inquiry

into the administration of the Plan--an area of exclusive

federal concern--because some of the drafts on the

Bank's account were for benefit claims paid after the

stop-loss extension expired. Aetna contends that the

Bank intends to prove that these drafts nonetheless fall

within the stop-loss extension because they arise from

benefit claims that Aetna improperly delayed

processing. To the extent that the Bank intends to

prove its claims through evidence that Aetna

improperly administered the Plan, Aetna is correct that

they would require inquiry into an area of exclusive

federal concern. See Hollis v. Provident Life and

Accident Ins. Co., 259 F.3d 410, 414 (5th Cir. 2001)

(right to receive benefits under an ERISA plan is an

area of exclusive federal concern); Hubbard v. Blue

Cross & Blue Shield Ass'n, 42 F.3d 942, 946 (5th Cir.

1995) (claim that would require inquiry into how benefit

claims were processed implicates area of federal

concern). There is, however, evidence that Aetna

drafted the Bank's account multiple times during the

stop-ioss extension. Because those drafts occurred

during the stop-loss extension, the Bank need not prove

that Aetna improperly delayed processing these claims

to recover. Accordingly, Aetna has established the first

element of the defense of preemption as a matter of law

only to the extent that the Bank's intends to rely upon

evidence that Aetna delayed processing claims for

benefits.’

Aetna argues that the second element of its defense is

satisfied as a matter of law because the parties are two

traditional ERISA entities--an employer and a plan

administrator. The Bank contends, however, that Aetna

was acting in its capacity as a vendor of insurance, not

as a fiduciary of the Plan. For purposes of ERISA

preemption the critical distinction is not whether the

parties to a claim are traditional ERISA entities in

some capacity, but instead whether the relevant state

law affects an aspect of the relationship that is

comprehensively regulated by ERISA. As we have

noted, ERISA may preempt some claims between

traditional ERISA entities but not others.* And a party

may qualify as an ERISA fiduciary with regard to some

claims but not others. See Pegram v. Herdrich, 530 U.S.

211, 225-26, 120 S. Ct. 2148, 147 L. Ed. 2d 164 (2000)

(ERISA defines party as fiduciary "only 'to the extent’

that he acts in such a capacity in relation to a plan")

(quoting 29 U.S.C. § 1002(21)(A)). "[T]he critical

determination [is] whether the claim itself created a

relationship between the plaintiff and defendant that is

so intertwined with an ERISA plan that it cannot be

separated." Hobson, 75 Fed.Appx. at 954.

Aetna argues that it is an ERISA fiduciary because the

Bank has delegated to it the discretionary

responsibility to administer the Plan. The Bank

correctly contends, however, that Aetna was not acting

in a fiduciary capacity when it represented to the Bank

which claims would be covered by the _ stop-loss

insurance policy extension. The duties that Aetna has

allegedly breached in negotiating the stop-loss policy

were owed to the Bank, the benefits of stop-loss

insurance inure solely to the Bank, and Aetna cites no

evidence that the stop-loss policy is a plan asset or was

purchased with plan assets. Cf’ DEPARTMENT OF

LABOR ADVISORY OPINION 92-02A, available at

1992 ERISA LEXIS 5, 1992 WL 15175 (stop-loss policy

is not a plan asset). But cf. Patelco Credit Union v.

Sahni, 262 F.3d 897, 908 (9th Cir. 2001) (checks for stop-

loss benefits are plan assets).

Aetna identifies no cases holding that a stop-loss

insurer is necessarily a plan fiduciary. The majority of

cases are to the contrary. For example, the Ninth

Circuit held in Geweke Ford v. St. Joseph's Omni

Preferred Care Inc., 130 F.3d 1355 (9th Cir. 1997), that

a plan's relationship to its stop-loss insurer is like that

between any commercial entities and is not regulated

by ERISA.” The reasoning of these courts is

persuasive and consistent with our own. The Bank's

claims implicate Aetna's responsibilities with respect to

Plan administration only to the extent they challenge

Aetna's processing of benefit claims."

II]

For the foregoing reasons, we reverse the district

court's grant of summary judgment on the Bank's

claims of detrimental reliance, breach of contract, and

misrepresentation; affirm the grant of summary

judgment on the Bank's Louisiana Revised Statute

22:657 claim; and remand for proceedings not

inconsistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART, AND

REMANDED.

CONCUR BY: REAVLEY

CONCUR: REAVLEY, Circuit Judge, specially

concurring:

10a

I concur in the judgment because this appeal is by the

Bank against Aetna US Healthcare Inc., the issuer of

the stop-loss policy. That party is separate from Aetna

Life Insurance Co., the plan administrator with

fiduciary responsibility.

Footnotes

nl The parties do not dispute that this qualifies as an

ERISA plan. See 29 U.S.C. § 1002(1) (defining employee

welfare benefit plans subject to ERISA).

n2 The distinction between an individual or specific

stop-loss amount and the aggregate stop-loss amount is

described in Troy Paredes, Note, Stop-Loss Insurance,

State Regulation, and ERISA: Defining the Scope of

Federal Preemption, 34 HARV. J. LEGIS. 233, 249

(1997), as follows:

There are two types of stop-loss insurance. Specific

stop-loss insurance covers a plan against the risk that a

particular participant's claims will exceed some

specified level. For example, if the insurance kicks in

when an individual's claims exceed $ 20,000 per year

and a participant has bona fide claims of $ 30,000, the

plan's stop-loss insurer covers $ 10,000 of the person's

claims. Alternatively, aggregate stop-loss insurance

covers a plan against the risk that the sum of all of its

participants’ claims will exceed some specified level.

For example, if the insurance kicks in when aggregate

claims exceed $ 2 million per year and claims under the

plan total $ 2.5 million, the stop-loss insurer covers $

500,000 of the claims.

See also Dennis K. Schaeffer, Comment, Insuring the

lla

Protection of ERISA Plan Participants: ERISA

Preemption and the Government's Duty to Regulate

Self-Insured Health Plans, 47 BUFF. L. REV. 1085,

1108-09 (1999) (discussing difference).

n3 Louisiana Revised Statute 22:658 requires insurers

issuing certain types of policies to pay the amount of

claims due within thirty days of proof of the loss.

n4 Louisiana Revised Statute 22:1220 imposes upon

insurers a duty of good faith and fair dealing.

nd Louisiana Revised Statute 22:657 provides that

claim arising under the terms of health and accident

contracts must be paid within thirty days of the date

that the insurer receives written notice and proof of the

claim. Failure to comply renders the insurer liable for

penalties and attorney's fees. Aetna does not argue that

the Bank's failure to properly plead this claim warrants

affirmance.

n6 See District Court's Order and Reasons at 2 n.1 (July

9, 2003) (noting that the Bank had "indicated its

intention to withdraw the breach of fiduciary duty

claim"); Bank of Louisiana's Memorandum Regarding

ERISA Preemption at 3 n.2 (Apr. 23, 2003) ("[Wle

concede that BOL's Count Four, claiming breach of

fiduciary duty, may be preempted by ERISA. Because

the Count adds nothing to the gravamen of BOL's

complaint, we will withdraw that Count without

prejudice.").

Because the Bank has withdrawn its claim that Aetna

delayed paying health care benefits, and a default to

perform the stop-loss policy is not covered by the

12a

statute, the Bank's claim for attorney's fees under

Louisiana Revised Statute 22:657 fails.

n7 Although the district court concluded that the claims

implicate an area of exclusive federal concern because

they “all pertain to the terms of an ERISA-governed

plan and will require the examination of the plan

terms," there is nothing in the summary judgment

record to support that conclusion. Neither Aetna nor

the district court identified what portion of the

agreement between the parties is in dispute. Cf.

Perkins v. Time Ins. Co., 898 F.2d 470, 473 (5th Cir.

1990) (claim for fraud and misrepresentation in the

procurement of an ERISA plan are not preempted).

n8 See Hobson v. Robinson, 75 Fed.Appx. 949, 955 (5th

Cir. 2003) (unpublished) (party may be a fiduciary with

regard to some claims but not others); Smith v. Tex.

Children's Hosp., 84 F.3d 152 (5th Cir. 1996)

(fraudulent inducement claim against employer not

preempted while breach of contract claim was

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

783 (5th Cir. 1994) (ERISA does not preempt all state

law claims between an employee and an employer,

merely because the employer administers an ERISA

plan to which the employee belongs); Sommers Drug

Stores Co. v. Employee Profit Sharing Trust, 793 F.2d

1456 (5th Cir. 1986) (claim for common law breach of

corporate fiduciary duty was not preempted by

ERISA, even though the defendant/corporate director

was an ERISA plan _ fiduciary and_ the

plaintiffs/employees were plan beneficiaries).

n9 A party acts in a fiduciary capacity when he: 1)

exercises discretionary control over plan assets; 2) he

l3a

renders investment advice for a fee to the plan; or 3) he

has discretionary responsibility with regard to plan

administration. 29 U.S.C. § 1002(21)(A); see also Tri-

State Mach., Inc. v. Nationwide Life Ins. Co., 33 F.3d

309, 313-14 (4th Cir. 1994) (claims by employer against

plan administrator and stop-loss insurer for delaying

the processing of claims are preempted); /ron Workers

Mid-South Pension Fund v. Terotechnology Corp., 891

F.2d 548, 553 (5th Cir. 1990) ("the state law is

preempted by section 514(a) if the conduct sought to be

regulated by the state law is 'part of the administration

of an employee benefit plan' " (quoting Martori Bros.

Distrib. v. James-Massengale, 781 F.2d 1349, 1358 (9th

Cir. 1986))).

n10 See also Seneca Beverage Corp. v. HealthNow N.Y.,

Inc., 383 F. Supp. 2d 413, 423 (W.D.N.Y. 2005) (stop-

loss insurer is not a fiduciary); Northern Kare

Facilities/Kingdom Kare, LLC v. Benefirst LLC, 344 F.

Supp. 2d 283, 287 (D.Mass. 2004) (same); Deeter v.

Greene, Tween and Co., Inc., CIV. A. 98-1222, 1998 U.S.

Dist. LEXIS 14625, 1998 WL 639190 (E.D. Pa. Sept. 18,

1998) (same); Union Health Care, Inc. v. John Alden

Life Ins. Co., 908 F. Supp. 429, 432-36 (S.D. Miss. 1995)

(same),

nll Aetna relies on Tri-State Machine, Inc. v.

Nationwide Life Insurance Co., 33 F.3d 309 (4th Cir.

1994), but that case is not to the contrary. Tri-State

Machine, an employer, sued Nationwide Life Insurance,

the administrator and stop-loss insurer for its ERISA

plan. Tri-State alleged that Nationwide Life "delayed

processing claims in years when the stop-loss limit had

been reached in order to deflect them into a new policy

year to be charged against Tri-State under its self-

l4a

funding obligations." Jd. at 314. The Fourth Circuit held

that such an allegation was essentially a challenge to a

plan administrator's processing of claims and therefore

related to the plan. Jd. In the present case, however,

the Bank has abandoned its claim that Aetna breached

its fiduciary duties by delaying the processing of claims.

The wrong the Bank seeks to recover for in the

remaining claims is Aetna's failure to reimburse it as it

represented that it would pursuant to the stop-loss

policy. Such a claim does not concern the processing of

claims for benefits.

The Fourth Circuit's cases are consistent with our

reasoning that the parties are not fiduciaries with

respect to the Bank's claims. In Phelps v. C.T.

Enterprises, Inc., 394 F.3d 213, 219 (4th Cir. 2005), the

court "emphasized that fiduciary duty under ERISA is

not an all-or-nothing concept." See also Cotton v. Mass.

Mutual Life Ins. Co., 402 F.3d 1267, 1277 (11th Cir.

2005) (fiduciary status under ERISA not an “all-or-

nothing concept").

Broadnax Mills, Inc. v. Blue Cross and Blue Shield of

Virginia, 867 F. Supp. 398 (E.D. Va. 1994), is also

distinguishable. The employer in Broadnax Mills sued

the plan administrator and stop-loss insurer on the

ground that it negligently failed to advise it to obtain an

aggregate stop-loss policy and breached the Plan's

Administrative Service Agreement. In Broadnax

Mills, it was conceded that the stop-loss insurance was

purchased by funds contributed by plan participants

and therefore concerned the disposal of plan assets. See

id. at 403. Aetna points to no similar concession in this

case. The plaintiff in Broadnax Mills also alleged that

the plan administrator breached its duty to disclose and

l5a

report the financial status of the plan. Jd. at 403-04. The

Bank's claims do not involve similar allegations.

16a

CIVIL ACTION NO. 02-236 SECTION "C" (5)

UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF LOUISIANA

BANK OF LOUISIANA

VERSUS

AETNA US HEALTHCARE, INC., ET AL

September 8, 2004, Decided

September 8, 2004, Filed, Entered

COUNSEL: For BANK OF LOUISIANA, plaintiff:

Maria Nan Alessandra, Phelps Dunbar, LLP, Henry L.

Klein, James Harold Daigle, Jr., Klein Daigle, LLC,

New Orleans, LA.

For AETNA US HEALTHCARE, INC., AETNA

LIFE INSURANCE COMPANY, defendants: Richard

G. Duplantier, Jr., Stephen James Moore, Galloway,

Johnson, Tompkins, Burr & Smith, John L. Fontenot,

Jr., Adams & Reese, New Orleans, LA.

JUDGES: HELEN G. BERRIGAN, UNITED

STATES DISTRICT JUDGE.

OPINION BY: HELEN G. BERRIGAN

OPINION:

ORDER AND REASONS

This matter comes before the Court on motion for

partial summary judgment and alternatively, for

declaratory relief filed by the plaintiff, Bank of

17a

Louisiana ("BOL") and motion for summary judgment

filed by Aetna US Healthcare, Inc. and Aetna Life

Insurance Company (collectively "Aetna"). Having

considered the record, the memoranda of counsel and

the law, the Court has determined that the motion filed

by BOL should be denied and the motion filed by the

defendants should be granted for the following reasons.

The Court has previously dismissed all of the

plaintiffs state law claims under the Employee

Retirement Income Security Act, 29 U.S.C. § 1001 et

seq. (Rec. Doc. 74). The Court afforded the plaintiff an

opportunity to amend its complaint, which it did with a

second' Second Amended Complaint setting forth

additional claims of "ERISA Fiduciary Breach" and

"Equitable Relief." (Rec. Doc. 76).?

BOL does not present any new argument in its

motion arguing against ERISA preemption, and

essentially argues that ERISA is irrelevant because

the Aetna policies were with BOL, not its employees.’

The Court has carefully reconsidered the caselaw, and

reaffirms its previous holding that the state law claims

made by BOL are preempted. It also agrees that

ERISA creates substantial hurdles for a plaintiff in a

case such as this. "Stop-loss insurance, by which an

employer that self-funds its benefit plan insures against

the risk of excessive payouts, does not fit neatly into

ERISA's regulatory framework." Troy Paredes, Note,

Stop-Loss Insurance, State Regulation, and ERISA:

Defining the Scope of Federal Preemption, 34 Harv. J.

On Legis. 233 (1997). See e.g. Sealy, Inc. v. Nationwide

Mutual Insurance Co., 286 F. Supp.2d 625 (M.D.N.C.

2003)(employer with self-funded plan sought equitable

restitution under ERISA against stop-loss insurance

company).

18a

Although it appears that the plaintiff does not

oppose the defendants' motion for summary judgment

as it pertains to the ERISA claims, the determinative

factor in granting summary judgment in favor of-the

defendant is the plaintiff's candid admission that it is

seeking legal relief.

Only equitable relief is available in an ERISA case

to non-participants and non-beneficiaries under 29

U.S.C. § 1182(a). Great-West Life & Annuity Ins. Co.

v. Knudson, 534 U.S. 204, 151 L. Ed. 2d 635, 122 S. Ct.

708 (2002). To the extent that the plaintiff sues as a

fiduciary or employer, monetary relief for the claimed

contractual obligation is not equitable in nature.°

Bauhaus USA, Inc. v. Copeland, 292 F.3d 439 (5th Cir.

2002). "An injunction to compel the payment of money

past due under a contract, or specific performance of a

past due monetary obligation, was not typically

available in equity." Great-West, 524 U.S. at 210-211;

The Court in Great-West characterized the

suit in that case as "[a] claim for money due

and owing under a contract" and that such a

suit is "quintessentially an action at law."

Because the facts in today's case are, in

principle, indistinguishable from those in

Great-West, we are bound by that decision

and hold that § 502(a)(3) does not authorize

[plaintiff's] suit.

Bauhaus, 292 F.3d at 445, quoting Great-West, 534

U.S. at 210.

The Court understands the quagmire of ERISA

jurisprudence facing the plaintiff, and it is not

unsympathetic to the plaintiff's complaint that ERISA

19a

should not deprive it of its claim. The caselaw makes

clear, however, that the plaintiff is not the only

potential plaintiff who has faced this statutory

deprivation. The fact that the statute leaves the ~

plaintiff without a remedy, "vague notions of a statute's

‘basic purpose’ are nonetheless inadequate to overcome

the words of its text regarding the specific issue under

consideration." Great-West, 534 U.S. at 220, quoting

Mertens v. Hewitt Associates, 508 U.S. 248, 261, 124 L.

Ed. 2d 161, 113 S. Ct. 2063 (1993). As stated by the

Supreme Court in Great-West, in the very same section

of ERISA as Section 1132(a)(3), Congress authorized a

participant or beneficiary to bring a civil action without

reference to whether the relief sought is legal or

equitable. 29 U.S.C. § 1132(a)(1)(B). "But Congress did

not extend the same authorization to others. Rather, /$

1132(a)(3)|, by its terms, only allows for equitable

relief. We will not attempt to adjust the "carefully

crafted and detailed enforcement scheme" embodied

(*7] in the text that Congress has adopted. Because

petitioners are seeking legal relief--the imposition of

personal liability on respondents for a contractual

obligation to pay money-- /§ 1132(a)(3)] does not

authorize this action." Great-West, 534 U.S. at 221.

Accordingly,

IT IS ORDERED that the motion for partial

summary judgment and alternatively, for declaratory

relief filed by the plaintiff, Bank of Louisiana is

DENIED.

IT IS FURTHER ORDERED that the motion for

summary judgment filed by Aetna US Healthcare, Inc.

and Aetna Life Insurance Company is GRANTED.

20a

New Orleans, Louisiana, this 8th day of September,

2004.

HELEN G. BERRIGAN

UNITED STATES DISTRICT JUDGE

Footnotes

nl The plaintiff previously filed a Second Amended

Complaint. (Rec. Doc. 4). |

n2 In the pre-trial order subsequently entered into the

record, the plaintiff includes all dismissed claims,

making a meaningful discussion of the plaintiff's

remaining claims difficult. (Rec. Doc. 103). Similarly, in

BOL's motion, it does not identify or discuss the nature

of the remaining ERISA claims.

n3 The Court notes that BOL's extensive citation to

Roark v. Humana, Inc., 307 F.3d 298 (5th Cir. 2002)

may be misplaced. That case, although that case was

settled at the Supreme Court, its holding was recently

reversed by Aetna Health, Inc. v. Davila, 542 U.S. 200,

159 L. Ed. 2d 312, 124 S. Ct. 2488 (2004).

n4 Under U.S.C. § 1002, the term "participant" "means

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 ..." The term

"beneficiary" is defined as "a person designated by a

participant or by the terms of an employee.benefit plan,

who is or may be entitled to a benefit thereunder ..."

n5 Under Section 1002, "employer" "means any person

acting directly as an employer or indirectly in the

interest of an employer, in relation to an employee

benefit plan ..."

Zla

Section 1132(a)(3) allows for “appropriate equitable

relief" for a "participant, beneficiary or fiduciary," and

has been the subject of much jurisprudence

distinguishing between legal and equitable relief,

including Great-West. This section is a "catchall

provision” that "acts as a safety net, offering

appropriate equitable relief for injuries caused by

violations that /$ 1132] does not elsewhere adequately

remedy." Varity Corp. v. Howe, 516 U.S. 489, 512, 134 L.

Ed. 2d 130, 116 S. Ct. 1065 (1996).

The Court notes that Section 1132(a)(8) provides that

"[a] civil action may be brought ... by an employer ... to

obtain appropriate equitable relief ..." with regard to 29

U.S.C. § 1021(f)(1), which is now-repealed reporting

requirements. No other provision of Section 1132

provides an employer with a right to bring a civil

action.

Under 29 U.S.C. § 1132(e), federal district courts have

"exclusive jurisdiction of civil actions ... brought by a

participant, beneficiary, fiduciary, or any person

referred to in Section 1021(f)(1)," except for those

claims brought by participants or beneficiaries to

recover benefits due.

22a

CIVIL ACTION NO. 02-236 SECTION "C" (5)

UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF LOUISIANA

BANK OF LOUISIANA

VERSUS

AETNA US HEALTHCARE, INC., ET AL

July 9, 2003, Decided

July 9, 2003, Filed, Entered

COUNSEL: For BANK OF LOUISIANA, plaintiff:

Henry L. Klein, Henry L. Klein Attorney at Law,

Maria Nan Alessandra, Phelps Dunbar, LLP, James

Harold Daigle, Jr., Klein Daigle, LLC, New Orleans,

LA.

For AETNA US HEALTHCARE, INC., AETNA

LIFE INSURANCE COMPANY, defendants: Richard

G. Duplantier, Jr., John L. Fontenot, Jr., Galloway,

Johnson, Tompkins, Burr & Smith, New Orleans, LA.

JUDGES: HELEN C. BERRIGAN, UNITED

STATES DISTRICT JUDGE.

OPINION BY: HELEN C. BERRIGAN

OPINION:

ORDER AND REASONS

This matter comes before the Court to determine

the law applicable to the plaintiffs claims. Having

23a

considered the record, the memoranda of counsel and

the law, the Court has determined that the plaintiff's

claims are preempted by the Employee Retirement

Income Security Act, 29 U.S.C. § 1001 ("ERISA") for

the following reasons.

The plaintiff, Bank of Louisiana ("BOL"), filed this

diversity suit against Aetna US Healthcare, Inc. and

Aetna Life Insurance Company (collectively "Aetna")

seeking the reimbursement of funds for claims made by

BOL employees under an Aetna policy. In its

complaint, BOL made four state law claims: (1)

misrepresentation; (2) detrimental reliance; (3) breach

of contract; and (4) breach of fiduciary duty.’ The issue

of ERISA preemption was briefed on order of the

Court. In its memoranda, the plaintiff identifies an

additional claim under La. Rev. Stat. 22:657, which has

never been pleaded,’ and claims that it is a viable claim

along with the claims for detrimental reliance and/or

negligent misrepresentation. (Rec. Doc. 64, Rec. Doc.

70, p. 2).

There are two types of ERISA preemption:

complete preemption under 29 U.S.C. 1132 ("Section

502") and conflict preemption under 29 U.S.C. § 1144

("Section 514"). Roark v. Humana, Inc., 307 F.3d 298,

305 (5th Cir. 2002). Complete preemption exists where

the state law duplicates or falls within the scope of an

ERISA § 502 remedy; it can provide subject matter

jurisdiction in this Court. Id. Conflict preemption under

Section 514 is provided where state laws "relate to"

ERISA plans, but serves only as a defense and does not

confer original or removal jurisdiction in federal court.

n3 Id. The plaintiff and the defendant appear to agree

that this case does not present claims under Section

24a

502. Therefore, the Court's preemption analysis turns

to Section 514.

The "general preemption clause" ef Section 514(a)

provides that ERISA "shall supersede any and all State

laws insofar as they may now or hereafter relate to any

employee benefit plan" governed by ERISA.‘ This

definition receives broad jurisprudential interpretation.

CIGNA Healthplan of Louisiana, Inc. v. State of

Louisiana, 82 F.3d 642 (Sth Cir.), cert. Denied, 519 U.S.

964, 186 L. Ed. 2d 304, 117 S. Ct. 387 (1996). In order to

"relate to" a plan, a state law claim must have "a

connection with or reference to such plan." Shaw v.

Delta Air Lines, Inc., 463 U.S. 85 96-97, 77 L. Ed. 2d

490, 103 S. Ct. 2890 (1983); Rozzell v. Security Services,

Inc., 38 F.3d 819, 821 (1994). There is no real issue that

the claims made by BOL against Blue Cross "relate to"

a covered plan for present purposes.

In order to be preempted by ERISA, the state law

claim must also (1) address an area of exclusive federal

concern, and (2) directly affect the relationship between

the traditional ERISA entities: the employer, the plan

and its fiduciaries, and the participants and

beneficiaries. Reliable Home Health Care v. Union

Central Insurance Co., 295 F.3d 505, 515 (5th Cir.

2002). The Court finds that all of the plaintiff's state law

claims set forth in the complaint are preempted under

Section 514(a). The parties are two traditional ERISA

entities: the employer and the plan insurer. The claims

all pertain to the terms of an ERISA-governed plan and

will require the examination of plan terms. Such plan

interpretation has been found to be sufficient to

warrant ERISA preemption. Christopher v. Mobil Oil

Corp., 950 F.2d 1209, 1218 (5th Cir.), cert. denied, 506

U.S. 820, 121 L. Ed. 2d 35, 113 S. Ct. 68 (1992). The

25a

necessary examination of policy language or

amendment terms warrant preemption in light of the

expansiveness of Section 514(a); "the underlying

conduct alleged by [plaintiff] cannot be severed from its

connection to the Plan." Reliable, 295 F.3d at 516.

This conclusion comports with the rule that

"preempted state law includes any state law cause of

action as it relates to an employee benefit plan, even if

it arises under a general law which in and of itself has

no connection to employee benefit plans." Christopher,

950 F.2d at 1219. Specific state law claims which have

been preempted include fraud, civil conspiracy, breach

of contract, interference with contract rights,

negligence, gross negligence, Christopher, supra, fraud

and negligent misrepresentation, Lee v. E. I. DuPont de

Nemours & Co., 894 F.2d 755 (5th Cir. 1990).

The Court finds no reason to except the plaintiff's

state law claims for detrimental reliance and

misrepresentation from preemption, since they meet

hoth prongs of the test. In arguing against preemption,

the plaintiff erroneously relies on the rule established

in cases where an independent third-party provider

sues the plan for misrepresenting the insured status of

a patient prior to providing medical services. See e.g.,

Jefferson Parish Hospital v. Principal Health Care of

Louisiana, 934 F. Supp. 206 (E.D.La. 1996); Jefferson

Parish Hospital v. Central States Southeast &

Southwest Areas Health & Welfare Fund, 814 F. Supp.

25 (E.D.La. 1993). A health care provider is not a

"traditional ERISA entity" for purposes of the

preemption analysis.

In its memoranda, the plaintiff singles out a claim

for damages under La. Rev. Stat. 22:657 ° for

26a

consideration under the "savings clause" in Section

514(b)(2)(A). That clause provides that nothing in

ERISA "shall be construed to exempt or relieve any

person from any law of any State which regulates

insurance, banking, or securities." The Supreme Court

recently restated the test which determines whether a

state law qualifies for saving from ERISA preemption.

"First, the state law must be specifically directed

toward entities engaged in insurance ... Second, as

explained above, the state law must substantially affect

the risk pooling arrangement between the insurer and

the insured. Kentucky Ass'n of Health Plans, Inc. v.

Miller, U.S. ,155 L. Ed. 2d 468, 123 S. Ct. 1471, 1479

(2003).

Here, there is no dispute that La. Rev. Stat. $

22:657 is directed toward entities engaged in insurance

for purposes of the first prong of the Kentucky test.

The Supreme Court explained the second element:

We emphasize that conditions on the right

to engage in the business of insurance must

also substantially affect the risk pooling

arrangement between the insurer and the

insured to be covered by ERISA's savings

clause. Otherwise any state law aimed at

insurance companies could be deemed a law

that "regulates insurance," contrary to out

interpretation.

Kentucky, 123 S. Ct. at 1477. Here, the Court can not

find that Section 22:657 "substantially affects the risk

pooling arrangement between insurer and insured" for

purposes of the savings clause. The statute merely

provides additional penalties for late payment. This

27a

finding is in conformity with the caselaw: "almost all of

the cases addressing the issue hold that 22:657 is

subject to ordinary preemption under ERISA section

514 ... Notably, many of these cases specifically find

that Section 22:657 is preempted because it creates an

alternative remedy that is not authorized under

ERISA's civil enforcement scheme." Arana v. Ochsner

Health Plan, 302 F.3d 462, 473 (5th Cir. 2002), reh'g en

bane granted, 319 F.3d 205 (2003) (internal citations

omitted). See also, Anderson v. Business Men's

Assurance Co., 2003 U.S. Dist. LEXIS 9833, 2003 WL

21305335 (E.D.La.) (J. Fallon); Clancy v. Employers

Health Ins. Co., 101 F. Supp. 2d 463 (E.D.La. 2000) (J.

Clement).

This Court agrees that, in addition, Section 22:657

would be among the state laws that are incompatible

with ERISA because it adds a judicial remedy that is

not available under ERISA. Such supplementation has

been found to "patently violates ERISA's policy of

inducing employers to offer benefits by assuring a

predictable set of liabilities, under uniform standards of

primary conduct and a uniform regime of ultimate

remedial orders and awards when a violation has

occurred." Rush Prudential HMO, Inc. v. Moran, 536

U.S. 355, 379, 153 L. Ed. 2d 375, 122 S. Ct. 2151 (2002).

Accordingly,

IT IS ORDERED that the plaintiffs state law

claims for (1) misrepresentation, (2) detrimental

reliance, and (3) violation of La. Rev. Stat. § 22:657 are

DISMISSED as PREEMPTED by ERISA, and the

plaintiff's claims for (4) breach of contract, (5) violations

of La. Rev. Stat. § 22:658 and § 22:1220, and (6) breach

of fiduciary duty are DISMISSED as abandoned. This

28a

dismissal shall take effect in ten days, in order to allow

the plaintiff an opportunity to amend its complaint, if

appropriate.

The parties are encouraged to pursue amicable

resolution.

New Orleans, Louisiana, this 9th day of July, 2003.

HELEN G. BERRIGAN

UNITED STATES DISTRICT JUDGE

Footnotes

nl The plaintiff has indicated its intention to withdraw

the claim for breach of fiduciary duty. (Rec. Doc. 64, p.

3, fn. 2). The plaintiff does not mention the state law

breach of contract claim in the memoranda, and the

Court deems this claims abandoned.

n2 The plaintiff has pled in an amended complaint a

claim under 22:658 and 22:1220, which it does not

discuss in its memoranda. (Rec. Doc. 3). The Court

assumes that the plaintiff intends to abandon such

claims; in the event it intends to present the same

argument as made with regard to La. Rev. Stat. 22:657,

those claims would be preempted for the reasons set

forth hereinafter.

n3 Subject matter jurisdiction is not an issue here, in

light of the existence of diversity jurisdiction.

n4 The parties apparently -agree that the Blue Cross

policy was an employee benefit plan covered by

ERISA.

n5 Section 22:657 provides for a penalty double the

amount of benefits due plus attorney's fees for an

29a

insurer's unreasonable failure to pay a claim within 30

days from receipt of written notice and proof of-claim.

30a

No. 04-30986

UNITED STATES COURT OF APPEALS FOR THE

FIFTH CIRCUIT

BANK OF LOUISIANA,

Plaintiff-Appellant,

versus

AETNA US HEALTHCARE INC; AETNA LIFE

INSURANCE COMPANY,

Defendants-Appellees.

October 18, 2006, Filed

“JUDGES: Before REAVLEY, GARZA, and

BENAVIDES, Circuit Judges.

OPINION BY: EMILIO M. GARZA

OPINION: EMILIO M. GARZA, Circuit Judge:

In response to the Petition for Rehearing filed by

defendants Aetna US Healthcare Inc. and Aetna Life

Insurance Company, and having duly considered the

response and the reply, we withdraw the prior panel

opinion, 459 F.3d 610, in its entirety and substitute the

following:

The Bank of Louisiana ("the Bank") appeals a

summary judgment for the defendants Aetna US

Healthcare Inc. and Aetna Life Insurance Company

(collectively "Aetna"). The issue on appeal is whether

dla

~ the Bank's state law claims of detrimental reliance,

breach of contract, and misrepresentation are

preempted by the Employee Retirement Income

Security Act, 29 U.S.C. § 1001 et seq. ("ERISA").

In 1995, the Bank entered into two contracts with

Aetna. First, the Bank entered into an administrative

services contract ("ASC") with Aetna to administer the

Bank's self-insured employee benefit plan ("the Plan").'

Second, the Bank purchased from Aetna a stop-loss

insurance policy for the Plan.? The stop-loss policy

provided an "individual" or "specific stop-loss amount" of

$ 50,000 and an “aggregate stop-loss amount" of $

600,000. The stop-loss coverage was scheduled to

terminate on December 31, 2000.

The Bank, however, reached the aggregate stop-loss >

amount in 2000. Late in that year, the parties met to

form a new contract that would provide fully-insured

coverage commencing on January 1, 2001. The Bank

also purchased an extension on its stop-loss coverage

that would apply to claims incurred in 2000 and for

which benefits would be paid during the first three

months of 2001. In a letter from account representative

Stacy McMahon, Aetna stated that the stop-loss

extension would mean that the Bank would "have no

additional claim liabilities for 2000 and no additional

fund transfers [would] be requested." McMahon further

stated that Aetna would "start wiring [the Bank's]

account for claims paid during the runoff period and

[the Bank would] be reimbursed at year-end." During

the three month run-off period, the Bank submitted $

271,628.38 in net claims incurred by plan members in

2000. (R. 177, 181, 218, 243.) Aetna drafted the Bank's

32a

account for these claims over the course of 2001 and

2002. Five of these drafts occurred during the three-

month stop-loss extension period, totaling $ 102,720.06.

Nevertheless, Aetna declined to reimburse the Bank.

The Bank filed a complaint alleging that Aetna had

negligently or fraudulently misrepresented that,

pursuant to the stop-loss extension, Aetna would

reimburse the Bank for the $ 271,628.38 that it drafted

from the Bank's account. In particular, the Bank first

claimed that Aetna "misrepresented the value and

benefit of its payment" to Aetna for the extension to the

stop-loss policy. Second, the Bank alleged that Aetna

misrepresented the scope of the stop-loss extension and

that the Bank had detrimentally relied on these

representations. Third, the Bank alleged that Aetna

breached "express and implied contracts," including a

contract to reimburse the Bank for claims that were

paid or should have been paid during the three-month

extension period. Fourth, the Bank alleged that Aetna

breached its fiduciary duties as plan administrator by

administering the Plan "in such a fashion as to delay the

processing of claims" in order to remove them from

coverage under the stop-loss extension. Finally, in an

amended complaint, the Bank alleged that Actna had

violated Louisiana Revised Statutes 22:658' and

22:1220.°

Aetna moved for summary judgment on the ground

that the Bank's claims were preempted by ERISA. Ina

series of briefs, Aetna argued that ERISA preempted

claims between an employer and a plan administrator.

(R. 930.) The Bank responded that its claim of

detrimental reliance and a claim for attorney's fees

under Louisiana Revised Statute 22:657, the latter of

which it had not pled,® were not preempted because

33a

they exclusively involved parties providing services to

an ERISA plan in a non-fiduciary capacity. (R. 635,

882.) The Bank withdrew its breach of fiduciary duty

claim’ and abandoned its claims under Louisiana

Revised Statute 22:658 & 22:1220. The district court

held that ERISA preempted all of the Bank's

remaining claims and granted summary judgment for

Aetna.

In reviewing a summary judgment, we apply the

same standard as the district court. Martin v. Alamo

Community Coll. Dist., 353 F.3d 409, 412 (5th Cir.

2003). We affirm only if there is no genuine issue of

material fact and the movant is entitled to judgment as

a matter of law. Jd. For a defendant to obtain summary

judgment on an affirmative defense, it must establish

beyond dispute all of the defense's essential elements.

Id. We review the district court's legal determination

that ERISA preempts a state law claim de novo.

Bullock v. Equitable Life Assurance Soc'y of the

United States, 259 F.3d 395, 399 (5th Cir. 2001).

ERISA's preemption clause, 29 U.S.C. § 1144(a),

states that with certain exceptions, ERISA '"shalil

supersede any and all State laws insofar as they may

now or hereafter relate to any employee benefit plan . .

. ." The Supreme Court has "observed repeatedly that

this broadly worded provision is ‘clearly expansive.’ "

E’'gelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 146,

121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001) (quoting N.Y.

State Conference of Blue Cross & Blue Shield Plans v.

Travelers Ins. Co., 514 U.S. 645, 655, 115 S. Ct. 1671,

131 L. Ed. 2d 695 (1995)). The Court has held that a

34a

state law "relates to an ERISA plan ‘if it has a

connection with or reference to such a plan.'" /d. at 147

(quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97,

103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983)).

Simultaneously, however, the Court recognizes that,

given its broadest reading, the phrase "relate to" would

encompass virtually all state law, and that its

"connection with" and "reference to" interpretations are

"scarcely more restrictive." Id. at 146-47. The Court has,

therefore, declined to apply an "uncritical literalism" to

the phrase and instead takes the "the objectives of the

ERISA statute as a guide to the scope of the state law

that Congress understood would survive, as well as to

the nature of the effect of the state law on ERISA

plans." /d. at 147 (internal quotation marks omitted).

Congress's objectives in enacting ERISA

were to protect interstate commerce and the

interests of participants in employee benefit

plans and their beneficiaries, by requiring

the disclosure and reporting to participants

and beneficiaries of financial and other

information with respect thereto, by

establishing standards oof conduct,

responsibility, and obligation for fiduciaries

of employee benefit plans, and by providing

appropriate remedies, sanctions, and ready

access to the Federal courts.

29 U.S.C. § 1001(b). To this end, ERISA's preemption

provision is intended "to establish a uniform

administrative scheme, which provides a set of

standard procedures to guide processing of claims and

disbursement of benefits." Egelhoff, 532 U.S. at 148

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

30a

9, 107 S. Ct. 2211, 96 L. Ed. 2d 1 (1987)). A uniform

administrative scheme serves to minimize

administrative and financial burdens by avoiding the

need to tailor plans to the peculiarities of the law of

each state. Ingersoll-Rand Co. v. McClendon, 498 U.S

133, 142, 111 S. Ct. 2.78, 112 L. Ed. 2d 474 (1990).

In light of these statutory objectives, this court

applies a two-prong test to the defense of ERISA

preemption. A defendant pleading preemption must

prove that: (1) the claim "addresses an area of exclusive

federal concern, such as the right to receive benefits

under the terms of the Plan; and (2) the claim directly

affects the relationship among traditional ERISA

entities--the employer, the plan and its fiduciaries, and

the participants and beneficiaries." Mayeaux v. La.

Health Serv. and Indem. Co., 376 F.3d 420, 432 (5th Cir.

2004). Because ERISA preemption is an affirmative

defense, Aetna bears the burden of proof on both

elements. See Metro. Life Ins. Co. v. Taylor, 481 U.S.

58, 68, 107 S. Ct. 1542, 95 L. Ed. 2d 55 (1987) (ERISA

preemption is a defense); Settles v. Golden Rule Ins.

Co., 927 F.2d 505, 508 (10th Cir. 1991) (defendant bears

burden of proving ERISA preemption); Kanne v. Conn.

Gen. Life Ins. Co., 867 F.2d 489, 492 n.4 (9th Cir. 1988)

(same).

Aetna argues that the Bank's claims require inquiry

into the administration of the Plan--an area of exclusive

federal concern--because some of the drafts on the

Bank's account were for benefit claims paid after the

stop-loss extension expired. Aetna contends that the

Bank intends to prove that these drafts nonetheless fall

within the stop-loss extension because they arise from

benefit claims that Aetna improperly delayed

processing. To the extent that the Bank intends to

36a

prove its breach of contract claim through evidence

that Aetna improperly delayed processing and paying

benefit claims, Aetna is correct that it would require

inquiry into an area of exclusive federal concer”. See

Hollis v. Provident Life and Accident Ins. Co., 259 F.3d

410, 414 (5th Cir. 2001) (right to receive benefits under

an ERISA plan is an area of exclusive federal concern);

Hubbard v. Blue Cross & Blue Shield Ass'n, 42 F.3d

942, 946 (Sth Cir. 1995) (claim that would require

inquiry into how benefit claims were processed

implicates area of federal concern).

The Bank has asserted, however, several other

claims that do not require inquiry into Aetna's

processing of benefit claims or administration of the

Plan. For example, to the extent the Bank's breach of

contract claim is premised on Aetna's failure to

reimburse it for amounts actually paid-during the

three-month extension period, the claim does not

depend on proof that Aetna improperly delayed paying

and processing benefit claims. Likewise, the Bank has

asserted detrimental reliance and misrepresentation

claims based on Aetna's conduct in negotiating the

stop-loss extension with the Bank. These claims do not

challenge any act or omission by Aetna in processing

benefit claims or administering the Plan; rather, they

call into question Aetna's representations about the

scope of the stop-loss extension. The Bank need not

prove that Aetna improperly administered the Plan in

order to prevail on any of these claims.* Accordingly,

Aetna has established the first element of the defense

of preemption as a matter of law only on the Bank's

claim that Aetna breached the stop-loss extension by

failing to reimburse the Bank for amounts the Bank

contends should have been, but were not, paid during

3/a

the three-month extension period, 7.e., by delaying the

processing and paying of claims for benefits.’

Aetna argues that the second element of its defense

is satisfied as a matter of law because the parties are

two traditional ERISA entities--an employer and a plan

administrator. The Bank contends, however, that Aetna

was acting in its capacity as a vendor of insurance, not

as a fiduciary of the Plan. For purposes of ERISA

preemption the critical distinction is not whether the

parties to a claim are traditional ERISA entities in

some capacity, but instead whether the relevant state

law affects an aspect of the relationship that is

comprehensively regulated by ERISA. As we have

noted, ERISA may preempt some claims between

traditional ERISA entities but not others.’” And a

party may qualify as an ERISA fiduciary with regard

to some claims but not others. See Pegram v. Herdrich,

530 U.S. 211, 225-26, 120 S. Ct. 2143, 147 L. Ed. 2d 164

(2000) (ERISA defines party as fiduciary “only 'to the

extent’ that he acts in such a capacity in relation to a

plan") (quoting 29 U.S.C. § 1002(21)(A)). "|T jhe critical

determination [is] whether the claim itself created a

relationship between the plaintiff and defendant that is

so intertwined with an ERISA plan that it cannot be

separated." Hobson, 75 Fed. Appz. at 954.

Aetna argues that it is an ERISA fiduciary because

the Bank has delegated to it the discretionary

responsibility to administer the Plan.'' The Bank

correctly contends, however, that Aetna was not acting

in a fiduciary capacity when it negotiated the stop-loss

extension, represented to the Bank which claims would

be covered by the stop-loss extension, and performed

its duties under the stop-loss extension. Aetna

identifies no cases holding that a stop-loss insurer is

38a

necessarily a plan fiduciary.” The benefits of stop-loss

insurance inure solely to the Bank, and Aetna cites no

evidence that the stop-loss policy is a plan asset or was

purchased with plan assets. Cf; DEPARTMENT OF

LABOR ADVISORY OPINION 92-02A, available at

1992 WL 15175 (stop-loss policy is not a plan asset). But

cf. Patelco Credit Union v. Sahni, 262 F.3d 897, 908

(9th Cir. 2001) (checks for stop-loss benefits are plan

assets). Nor does Aetna identify any cases holding that

a plan administrator who also brokers or negotiates a

stop-loss insurance policy does so in its capacity as a

fiduciary. The only claim to implicate Aetna's fiduciary

relationship with the Bank is the Bank's claim that

Aetna breached the stop-loss extension by failing to

reimburse the Bank for claims that Aetna delayed

processing and paying and, hence, that were not paid

during the extension period. Accordingly, Aetna has

established the second element of its preemption

defense only as to this latter claim."

Ill

For the foregoing reasons, we reverse the district

court's grant of summary judgment on the Bank's

claims of detrimental reliance and misrepresentation, as

well as the Bank's breach of contract claim based on

Aetna's failure to reimburse the Bank for benefit claims

that were actually paid during the extension period;

affirm the grant of summary judgment on the Bank's

breach of contract claim based on Aetna's failure to

reimburse the Bank for benefit claims that were not

paid during the extension period and the Banks's

Louisiana Revised Statute 22:657 claim; and remand for

proceedings not inconsistent with this opinion.

39a

AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED.

Footnotes

nl The parties do not dispute that this qualifies as an

ERISA plan. See 29 U.S.C. § 1002(1) (defining

employee welfare benefit plans subject to ERISA).

n2 On appeal, Aetna, for the first time, seeks to

distinguish among the various Aetna entities involved

in this dispute. Specifically, Aetna asserts that Aetna

Life Insurance Company, which operates under the

registered trade name "Aetna U.S. Healthcare," is the

party whom the Bank contracted to administer the

Plan; that Aetna Casualty Company, now known as

Aetna Insurance Company of Connecticut--which is not

a party to this suit--is the party who issued the stop-

loss insurance policy for the Plan; and that Aetna U.S.

Healthcare, Inc., although named by the Bank as a

defendant in this suit, is a separate foreign corporation

that has no connection to the Plan. Therefore, Aetna

argues, at issue in this case are only claims by an

ERISA employer against an ERISA plan

administrator.

Aetna did not raise this argument in the district court.

To the contrary, Aetna repeatedly represented in its

pleadings that the Bank entered into the ASC with

"Aetna" and that "Aetna" issued the Policy to the Bank.

(R. 5, 657, 847, 926-27, 944, 1116-17, 1494-95, 1502.)

Accordingly, we do not reach Aetna's new contention

that it is not the stop-loss insurer. See Theriot v. Parish

of Jefferson,185 F.3d 477, 491 n.26 (5th Cir. 1999) ("An

appellate court... . may not consider facts which were

40a

not before the district court at the time of the

challenged ruling.").

n3 The distinction between an individual or specific

stop-loss amount and the aggregate stop-loss amount is

described in Troy Paredes, Note, Stop-Loss Insurance,

State Regulation, and ERISA: Defining the Scope of

Federal Preemption, 34 HARV. J. LEGIS. 233, 249

‘) as follows:

here are two types of stop-loss insurance.

Specific stop-loss insurance covers a plan against

ne risk that a particular participant's claims will

exceed some specified level. For example, if the

insurance kicks in when an individual's claims

exceed $ 20,000 per year and a participant has

bona fide claims of $ 30,000, the plan's stop-loss

insurer covers $ 10,000 of the person's claims.

Alternatively, aggregate stop-loss insurance

covers a plan against the risk that the sum of all of

its participants’ claims will exceed some specified

level. For example, if the insurance kicks in when

aggregate claims exceed $ 2 million per year and

claims under the plan total $ 2.5 million, the stop-

loss insurer covers $ 500,000 of the claims.

See also Dennis K. Schaeffer, Comment, /nsuring the

Protection of ERISA Plan Participants: ERISA

Preemption and the Government's Duty to Regulate

Self-Insured Health Plans, 47 BUFF. L. REV. 1085,

1108-09 (1999) (discussing difference).

n4 Louisiana Revised Statute 22:658 requires insurers

issuing certain types of policies to pay the amount of

claims due within thirty days of proof of the loss.

4la

insurers a duty of good faith and fair dealing.

n6 Louisiana Revised Statute 22:657 provides that

claim arising under the terms of health and accident

contracts must be paid within thirty days of the date

that the insurer receives written notice and proof of the

claim. Failure to comply renders the insurer liable for

penalties and attorney's fees. Aetna does not argue that

the Bank's failure to properly plead this claim warrants

affirmance.

n7 See District Court's Order and Reasons at 2 n.1 (July

9, 2003) (noting that the Bank had “indicated its

intention to withdraw the breach of fiduciary duty

claim"); Bank of Louisiana's Memorandum Regarding

ERISA Preemption at 3 n.2 (Apr. 23, 2003) ("[Wie

concede that BOL's Count Four, claiming breach of

fiduciary duty, may be preempted by ERISA. Because

the Count adds nothing to the gravamen of BOL's

complaint, we will withdraw that Count without

prejudice.").

Because the Bank has withdrawn its claim that Aetna

delayed paying health care benefits, and a default to

perform the stop-loss policy is not covered by the

statute, the Bank's claim for attorney's fees under

Louisiana Revised Statute 22:657 fails.

n8 Aetna argues that the Bank cannot prevail on these

theories for a variety of reasons, but the Bank's

likelihood of success on the merits has no bearing on

whether the claims are preempted by ERISA, which is

the sole issue before this Court.

n9 Although the district court concluded that the claims

implicate an area of exclusive federal concern because

they “all pertain to the terms of an ERISA-governed

42a

plan and will require the examination of the plan

terms," there is nothing in the summary judgment

record to support that conclusion. Neither Aetna nor

the district court identified what portion of the Plan or

ASC is in dispute. Cf. Perkins v. Time Ins. Co., 898

F.2d 470, 473 (5th Cir. 1990) (claim for fraud and

misrepresentation in the procurement of an ERISA

plan are not preempted).

nl0 See Hobson v. Robinson, 75 Fed. Appx. 949, 955 (5th

Cir. 2003) (unpublished) (party may be a fiduciary with

regard to some claims but not others); Smith v. Tex.

Children's Hosp., 84 F.3d 152 (5th Cir. 1996)

(fraudulent inducement claim against employer not

preempted while breach of contract claim was

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

783 (5th Cir. 1994) (ERISA does not preempt all state

law claims between an employee and an employer,

merely because the employer administers an ERISA

plan to which the employee belongs); Sommers Drug

Stores Co. v. Employee Profit Sharing Trust, 793 F.2d

1456 (5th Cir. 1986) (claim for common law breach of

corporate fiduciary duty was not preempted by

ERISA, even though the defendant/corporate director

was an ERISA plan fiduciary and_ the

plaintiffs/employees were plan beneficiaries).

nll A party acts in a fiduciary capacity when he: 1)

exercises discretionary control over plan assets; 2) he

renders investment advice for a fee to the plan; or 3) he

has discretionary responsibility with regard to plan

administration. 29 U.S.C. § 1002(21)(A); see also Tri-

State Mach., Inc. v. Nationwide Life Ins. Co., 33 F.3d

309, 313-14 (4th Cir. 1994) (claims by employer against

plan administrator and stop-loss insurer for delaying

the processing of claims are preempted); Jron Workers

43a

Mid-South Pension Fund v. Terotechnology Corp., 891

F.2d 548, 553 (Sth Cir. 1990) ("the state law is

preempted by section 514(a) if the conduct sought to be

regulated by the state law is ‘part of the administration

of an employee benefit plan' " (quoting Martori Bros.

Distrib. v. James-Massengale, 781 F.2d 1349, 1358 (9th

Cir. 1986))).

nl2 The majority of cases are to the contrary. For

example, the Ninth Circuit held in Geweke Ford v. St.

Joseph's Omni Preferred Care Inc., 1380 F.3d 1355 (9th

Cir. 1997), that a plan's relationship to its stop-loss

insurer is like that between any commercial entities

and is not regulated by ERISA. See also Seneca

Beverage Corp. v. HealthNow N.Y., Inc., 383 F. Supp.

2d 413, 423 (W.D.N.Y. 2005) (stop-loss insurer is not a

fiduciary); Northern Kare Facilities/Kingdom Kare,

LLC v. Benefirst LLC, 344 F. Supp. 2d 283, 287

(D.Mass. 2004) (same); Deeier v. Greene, Tween and

Co., Inc., 1998 U.S. Dist. LEXIS 14625, CIV. A. 98-

1222, 1998 Wi, 639190 (ED. Pa. Sept. 18, 1998) (same);

Union Health Care, Inc. v. John Alden Life Ins. Co.,

908 F. Supp. 42%, 432-36 (S.D. Miss. 1995) (same). The

reasoning cf these courts is persuasive and consistent

with our own.

nl3 Aetna relies on Tri-State Machine, Inc. v.

Nationwide Life Insurance Co., 33 F.3d 309 (4th Cir.

1994), but that case is not to the contrary. Tri-State

Machine, an employer, sued Nationwide Life Insurance,

the administrator and stop-loss insurer for its ERISA

plan. Tri-State alleged that Nationwide Life "delayed

processing claims in years when the stop-loss limit had

been reached in order to deflect them into a new policy

year to be charged against Tri-State under its self-

funding obligations." Jd. at 314. The Fourth Circuit held

44a

that such an allegation was essentially a challenge to a

plan administrator's processing of claims and therefore

related to the plan. Jd. Likewise, the Bank's breach of

contract claim, to the extent it is premised on Aetna's

alleged delaying the processing of claims, is preempted.

The wrong for which the Bank seeks to recover in its

remaining claims, however, is Aetna's conduct in

negotiating and performing under the _ stop-loss

extension. Such claims do not concerr the processing of

claims for benefits and are not preempted.

The Fourth Circuit's cases are consistent with our

reasoning that the parties are not fiduciaries with

respect to the Bank's surviving claims. In Phelps v.

C.T. Enterprises, Inc., 394 F.3d 213, 219 (4th Cir. 2005),

the court "emphasized that fiduciary duty under

ERISA is not an all-or-nothing concept." See also

Cotton v. Mass. Mutual Life Ins. Co., 402 F.3d 1267,

1277 (11th Cir. 2005) (fiduciary status under ERISA

not an "all-or-nothing concept").

Broadnax Mills, Inc. v. Blue Cross and Blue Shield of

Virginia, 867 F. Supp. 398 (E.D. Va. 1994), is also

distinguishable. The employer in Broadnax Mills sued

the plan administrator and stop-loss insurer on the

ground that it negligently failed to advise it to obtain an

aggregate stop-loss policy and breached the Plan's

Administrative Service Agreement. In Broadnax

Mills, it was conceded that the stop-loss insurance was

purchased by funds contributed by plan participants

and therefore concerned the disposal of plan assets. See

id. at 403. Aetna points to no similar concession in this

case. The plaintiff in Broadnax Mills also alleged that

the plan administrator breached its duty to disclose and

report the financial status of the plan. Jd. at 403-04. The

Bank's claims do not involve similar allegations.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.