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

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_2029%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2006

## Text

ne
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

1

~ _—

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?

W

TABLE OF CONTENTS
Page

RR IY MID ccsccceseoseevereceseseesoovesesereceseseeesevepersvcccevoeses i
I I I ss cussovesicovecssontyeessvorsvsctoneersveesevessress iii

OPINIONS BELOW

APPENDIX
Fifth Circuit Court of Appeals Opinion

LS ee 16a

I I IIIT coc ccexercsesessesenvoecseesoncecosrentenersesncesoees 22a

Fifth Circuit Court of Appeals Opinion on
Rehearing

du
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

w
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)
ee ik, CI ici iicititsiceitcbaiisiniesibddeininiclia inte ae 2
29 U.S.C. SECTION 1001

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

Vv
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

Bee SA ss MENA TUNE ERNGI) ssscscteinisiestscistantiniiiccedisasasortasiseiaiens 17

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

SP UDC. SECTION LEGA NAGA) cccivsnccsciccrsccnsossccessssestesosvessssv 17

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)

l
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

2

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

8

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

D

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),

6

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

7
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

8

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:

10

[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

11

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-

12

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”).

13

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).

14
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

15
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).

16

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.

17
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

18

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

19

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.

20

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.

21

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

22

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-

23

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.

24
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

la

(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.

2a

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").

I

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

3a

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

4a

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.

I

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).

A

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

6a

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

Ta

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

a

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

9a

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").

I

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.

Il

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).

A

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_2029%3A1. Public record. Not legal advice.