Opinion
Civil Action No. 3:01-CV-380-M.
October 1, 2001.
MEMORANDUM OPINION AND ORDER
Before the Court are two separate Motions for Judgment on the Pleadings, one filed on May 18, 2001 by Defendants Kaiser Foundation Health Plan of Texas and Permanente Medical Association of Texas, and the other filed on July 11, 2001 by Defendants Texas Health Choice, The Medical Group of Texas (f/k/a TexMed Physicians), and Sierra Health Services. Having considered the parties' briefs, as well as the applicable law, the Court is of the opinion that the motions should be GRANTED in part and DENIED in part, for the reasons stated below.
I. Background
In this case, Plaintiff Linda Erwin asserts several claims against her husband's HMO, Texas Health Choice ("THC"); THC's parent company, Sierra Health Services; Mr. Erwin's former HMO, Kaiser Foundation Health Plan of Texas (which originally issued the plan to Mr. Erwin); Kaiser's parent company, Permanente Medical Association of Texas; and The Medical Group of Texas, an organization that provides patient care under THC.
Plaintiff has filed three Complaints in this case. Her original Complaint consisted of two claims. First, Erwin alleged that Defendants violated Chapter 88 of the Texas Civil Practices and Remedies Code in that Defendants failed to exercise ordinary care when making health care treatment decisions by forcing Mr. Erwin, after his physician originally found him to be a candidate for a liver transplant, to wait a year before the HMO would pay for him to undergo the procedure. Additionally, Plaintiff contended that Defendants' actions in enforcing the one-year waiting period constituted common law fraud and civil conspiracy.
Defendants subsequently removed this case to federal court. Plaintiff then moved to remand the case, arguing that the Court had no subject-matter jurisdiction over the claims because the parties were not diverse and the causes of action were all based on state law. This Court denied the Motion to Remand on April 9, 2001, finding that ERISA preempted one or more of the state law claims within Plaintiff's original Complaint. Shortly after, Defendants moved for judgment on the pleadings, urging that because Plaintiff failed to assert any ERISA claims in her petition, this Court must enter judgment for Defendants. Plaintiff filed a response to Defendants' motions, and concurrently filed an Amended Complaint which differed from the original both in its factual allegations and in the causes of action set forth. The Court then began its determination of the merits of Defendants' motions. Just as the Court had reached a decision on whether to grant the motion, Plaintiffs filed a Second Amended Complaint. The Second Amended Complaint contained the following claims that were identical to those in the First Amended Complaint: violations of Chapter 88 of Texas Civil Practices and Remedies Code, vicarious liability for negligence of treating doctors, negligence, common law fraud, and conspiracy.
Because the Court had, at the time of filing of the Second Amended Complaint, already reached the issue of whether ERISA preempted the claims within the First Amended Complaint, it is issuing this Order, which only addresses the above-listed causes of action. It requests additional briefing from the parties on whether it should grant judgment on the pleadings for the new claims contained within the Second Amended Complaint: common law and statutory bad faith, third party beneficiary claims, and ERISA violations. Defendants must submit their briefs by October 22, 2001. Plaintiff's Response will be due by November 2. 2001. No replies will be permitted. Plaintiff may not file another Amended Complaint or add new parties until the Court has completed its analysis of whether Defendants are entitled to Judgment on the Pleadings.
I. ERISA-Preempted Claims
"After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." FED. R. CIV. P. 12(c). In considering such a motion, this Court must regard all "allegations of fact contained in the petition . . . as true." Cash v. Comm'r, 580 F.2d 152, 154 (5th Cir. 1978). Furthermore, a "motion for judgment on the pleadings, like a motion for summary judgment, should be granted only if there is no issue of material fact and if the pleadings show that the moving party is entitled to prevail as a matter of law." Greenberg v. Gen. Mills Fun Group, Inc., 478 F.2d 254, 256 (5th Cir. 1973).
In its most distilled form, case law construing ERISA preemption holds that a plaintiff's complaint about an HMO's decision whether to pay for a particular medical service (i.e., whether the insured is eligible for coverage, or whether the HMO properly decided not to cover the treatment in question) is completely preempted by ERISA, as it "relates to" an ERISA-qualified plan, but a plaintiff's claim that the insured received negligent treatment or poor quality of care from an HMO that acted as a provider of medical services rather than just a payor escapes ERISA preemption. 29 U.S.C. § 1144(a) (1994) ("[T]he 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 [qualified] employee benefit plan."). This distinction was highlighted in this Court's recent opinion in United Healthcare Insurance Co. v. Levy, 114 F. Supp.2d 559 (N.D. Tex. 2000) (Lynn, J.), in which the Court recognized that while "the regulation of medical decision-making is within a state's traditional authority to regulate matters relating to health care" when that decision-maker is the patient's treating physician, federal law must govern disputes over a plan administrator's "determination that the care contemplated is excluded by the plan." Id. at 564-65; accord Silva v. Kaiser Permanente, 59 F. Supp.2d 597, 599 (N.D. Tex. 1999) (Lindsay, J.) (finding that, while "claims regarding plan guidelines and utilization review procedures are preempted," when "plaintiffs sued the health plans under respond[eat] superior or similar theories, alleging that [the plans] should be held responsible for the negligence of the doctors they employed," the claims were not preempted).
The distinction between an HMO as a medical care provider and an HMO as an insurance payor is best illuminated by the cases of Corcoran v. United Healthcare, Inc., 965 F.2d 1321 (5th Cir. 1992) and Corporate Health Insurance, Inc. v. Tex. Department of Insurance, 215 F.3d 526 (5th Cir. 2000). In Corcoran, the Fifth Circuit determined that ERISA preempts a plaintiff's protestations of an HMO's refusal to cover a particular treatment recommended by the insured's doctor, even when the HMO's decision involves making a determination as to the appropriateness of that course of treatment. See 965 F.3d at 1332. Contrastingly, in Corporate Health the court held that ERISA did not preempt state law claims arising under Chapter 88 of the Texas Civil Practices and Remedies Code where the plaintiff claimed an HMO to be vicariously liable for actual treatment decisions made by the HMO's agent. See 215 F.3d at 534. The court explained its understanding of the interaction between Chapter 88 and ERISA as follows:
Section 88.002 reads:
(a) A health insurance carrier, health maintenance organization, or other managed care entity for a health care plan has the duty to exercise ordinary care when making health care treatment decisions and is liable for damages for harm to an insured or enrollee proximately caused by its failure to exercise such ordinary care.
(b) A health insurance carrier, health maintenance organization, or other managed care entity for a health care plan is also liable for damages for harm to an insured or enrollee proximately caused by the health care treatment decisions made by its:
(1) employees;
(2) agents;
(3) ostensible agents; or
(4) representatives who are acting on its behalf and over whom it has the right to exercise influence or control or has actually exercised influence or control which result in the failure to exercise ordinary care.
(c) It shall be a defense to any action asserted against a health insurance carrier, health maintenance organization, or other managed care entity for a health care plan that:
(1) neither the health insurance carrier, health maintenance organization, or other managed care entity, nor any employee, agent, ostensible agent, or representative for whose conduct such health insurance carrier, health maintenance organization, or other managed care entity is liable under Subsection (b), controlled, influenced, or participated in the health care treatment decision; and
(2) the health insurance carrier, health maintenance organization, or other managed care entity did not deny or delay payment for any treatment prescribed or recommended by a provider to the insured or enrollee.
(d) The standards in Subsections (a) and (b) create no obligation on the part of the health insurance carrier, health maintenance organization, or other managed care entity to provide to an insured or enrollee treatment which is not covered by the health care plan of the entity.
TEX. CIV. PRAC. REM. CODE ANN. § 88.002(a)-(d) (Vernon 1999). Section 88.001(5) defines a "health care treatment decision" as "a determination made when medical services are actually provided by the health care plan and a decision which affects the quality of the diagnosis, care, or treatment provided to the plan's insureds or enrollees." Id. § 88.0001(5).
When the liability provisions [of Chapter 88] are read together, they impose liability for a limited universe of events. The provisions do not encompass claims based on a managed care entity's denial of coverage for a medical service recommended by the treating physician: that dispute is one over coverage, specifically excluded by [Chapter 88 and preempted by ERISA]. Rather, [Chapter 88] would allow suit for claims that a treating physician was negligent in delivering medical services, and it imposes vicarious liability on managed care entities for that negligence. . . . Courts have observed that HMOs . . . typically perform two independent functions-health care insurer and medical care provider. . . . Although state efforts to regulate an entity in its capacity as plan administrator are preempted, managed care providers operate in a traditional sphere of state regulation when they wear their hats as medical care providers.Id. It follows that, in considering Erwin's claims, this Court must grant judgment on the pleadings for those causes of action that charge Defendants' malfeasance in their role as payor, but deny judgment for those claims relating to Defendants' status as medical services providers. Thus, the analysis will next proceed by discussing the applicability of the above standards to each of Erwin's claims individually.
A. Count 1: Violations of Chapter 88 of Texas Civil Practice and Remedies Code
Plaintiff alleges the following in her Second Amended Complaint:
Defendants violated their duty to exercise ordinary care when making health care treatment decisions and were negligent as follows:
a. In failing to adequately and promptly evaluate Mr. Erwin for a liver transplant;
b. In providing a quality of care in the treatment of Mr. Erwin that failed to comply with applicable medical standards of care;
c. In providing a quality of care in the treatment of Mr. Erwin that needlessly prolonged Mr. Erwin's pain and suffering, and ultimately caused Mr. Erwin's premature death;
d. In advising Mr. and Mrs. Erwin that a one-year waiting period was required before a liver transplant could be obtained under the subject health care plan;
e. In writing into the subject health care plan a one-year waiting provision for a liver transplant when such provision was neither anticipated by [Mr. Erwin's employer] nor allowed by the Texas Department of Insurance;
f. In enforcing an otherwise unenforceable one-year waiting period for a liver transplant against Charles H. Erwin;
g. In failing to timely approve Mr. Erwin for a liver transplant evaluation and a liver transplant;
h. In failing to timely provide Mr. Erwin with a liver transplant;
i. In granting approval for Mr. Erwin's liver transplant after knowing that it was no longer feasible to perform such transplant;
j. In unreasonably delaying and/or denying Mr. Erwin's liver transplant treatment and/or approval thereof; and
k. Such other act or omissions as may be proven at the time of trial.
Second Amended Complaint at 6. These allegations can be distilled into two distinct factual scenarios: First, Erwin argues that Defendants violated Chapter 88 through their agents' inadequate care of Mr. Erwin in treating him for his liver problems, most notably through failing to promptly and adequately evaluate Erwin for a transplant. See id. (a)-(c). Although Plaintiff does not indicate the doctor or doctors who treated Mr. Erwin, this Court can infer from other allegations within the Second Amended Complaint that the physicians at issue were most likely members of TexMed Physicians, a named Defendant in this action. Thus, these factual allegations set forth a vicarious liability claim not preempted by ERISA under Corporate Health, and the Court thus refuses to enter judgment on the pleadings for this cause of action.
Despite this, Defendants Kaiser Foundation Health Plan of Texas and Permanente Medical Association of Texas urge that the Court should grant judgment on the pleadings in their favor, arguing that they had nothing to do with the providing of medical services to Mr. Erwin because they sold their assets to Texas Health Choice before Mr. Erwin required such services. The allegations in the Second Amended Complaint are sufficiently unclear on this point to warrant the Court granting judgment on the pleadings in favor of these Defendants, however. The Second Amended Complaint alleges that the asset sale occurred on October 31, 1998, and that Mr. Erwin was diagnosed and began receiving treatment for his liver problems "[i]n or around late 1998." Second Amended Complaint at 3. Thus, it is impossible to tell from the pleadings which occurred first-the alleged negligence on the part of Mr. Erwin's treating physicians or the asset sale. Therefore, it would be premature for this Court to grant judgment on the pleadings for these Defendants, as the Complaint contains insufficient facts for this Court to definitively conclude that Kaiser and Permanente were not at all involved in providing medical services to Mr. Erwin.
Plaintiff also complains that Defendants violated Chapter 88 by refusing to promptly authorize a liver transplant, despite Mr. Erwin's physician having recommended one, because of a provision within Erwin's insurance policy requiring a one-year waiting period before the HMO would cover the operation. See id. (d)-(j). Unlike the above allegation, this is clearly an argument relating to wrongful refusal of coverage, which is preempted by ERISA. Therefore, the Court finds that, had this been the only basis proffered for Plaintiff's Chapter 88 claim, the Court would have been required to grant judgment on the pleadings on the Chapter 88 claim. Thus, this Court emphasizes that it is denying Defendants' request for judgment on the pleadings on this claim only because of the factual allegations set out in the previous paragraph that allege vicarious liability for certain physicians' treatment decisions-not because of Plaintiff's argument that Defendants are liable under Chapter 88 for including unconscionable terms within the insurance plan.
B. Count 2: Vicarious Liability for Negligence of Treating Doctors
Plaintiff's second claim is that "Defendants are liable for the negligent acts of the treating doctors and healthcare professionals, as employees and/or agents of Defendants, acting within the course and scope of their employment at all times. . . ." Id. at 6. Because this claim relates to Defendants' roles as medical care providers, the Court declines to grant Defendants' Motions for Judgment on the Pleadings on this claim.
C. Count 3: Negligence
Plaintiff's third claim alleges that, based on her contention that Defendants or their agents failed to properly treat Mr. Erwin, Defendants "breached the standard of care for similar medical care in Dallas, Texas, and in the nation at the time in question." Id. at 7. It is unclear whether Plaintiffs mean that Defendants committed negligence in not providing coverage for Mr. Erwin's transplant (which would be a preempted claim) or whether Defendants were negligent in not providing the proper quality of care to Mr. Erwin (which would not be preempted). Plaintiff has likely been purposeful in pleading the negligence claim vaguely, to encompass both factual scenarios. Thus, as with Plaintiff's Chapter 88 claim, this Court denies Defendants' motions as to the negligence cause of action, but again emphasizes that it bases its decision solely upon Plaintiff's allegations of the failure of Mr. Erwin's physicians to properly treat him, not upon Mrs. Erwin's argument that Defendants improperly made Mr. Erwin's liver transplant coverage determination.
D. Count 4: Common Law Fraud
Plaintiff also argues that "one or more Defendants engaged in common law fraud by concealing or failing to disclose a material fact, that the one[-]year waiting period was fictitious and unenforceable, within their knowledge, knowing that Mr. or Mrs. Erwin were ignorant of this fact and did not have an equal opportunity to discover the truth. . . ." Id. ERISA clearly preempts this cause of action, as its basis lies in Defendants' decision not to pay for Mr. Erwin's liver transplant until expiration of the one-year waiting period. Therefore, the Court concludes that it should grant Defendants' Motions for Judgment on the Pleadings as to this claim.
E. Count 5: Conspiracy
In her last cause of action, Erwin contends that "two or more Defendants engaged in a civil conspiracy, by one or more of the acts or omissions described herein, with a meeting of the minds, to negligently or fraudulently delay or deny necessary medical treatment to Mr. Erwin." Id. Again, the pleading is too vague for this Court to know whether Plaintiff is referring to Defendants' vicarious liability for their physicians' failure to provide quality treatment to Mr. Erwin, or whether the cause of action instead is directed at Defendants' coverage decisions. Therefore, the Court refuses to render judgment on the pleadings on this claim, but grounds its decision on Plaintiff's quality of care/vicarious liability allegations — not Erwin's contentions relating to the one-year waiting period.
II. Recharacterization of the Preempted State Law Claim as an ERISA Claim
This analysis also applies to Plaintiff's Chapter 88, negligence, and conspiracy claims insofar as they relate to Defendants' liability for their coverage decisions (e.g., imposing the one-year waiting period for Mr. Erwin's transplant) as opposed to their liability for the allegedly poor quality of care administered by Mr. Erwin's treating physicians.
Thus, this Court finds that the common law fraud claim constitutes the only cause of action of those analyzed above which is undeniably preempted by ERISA. Before granting judgment on the pleadings on to this claim, the Court must determine whether it can save the claim by recharacterizing it as a cognizable cause of action under ERISA. The Court finds, however, that it cannot recharacterize the fraud cause of action due to Plaintiff's request for money damages, which are prohibited in such an action under ERISA. ERISA's civil enforcement section provides:
(a) Persons empowered to bring a civil action
A civil action may be brought . . .
(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;. . . .
29 U.S.C. § 132(a)(3)(B)(i). Plaintiff's only demands for relief for this claim are for compensatory and punitive damages. See Second Amended Complaint at 10-11. A plaintiff may not seek such damages under the civil enforcement provision of ERISA, as they are not considered "appropriate equitable relief." See Mertens v. Hewitt Assoc., 508 U.S. 248, 255 (1993) ("Petitioners maintain that the object of their suit is `appropriate equitable relief'. . . . They do not, however, seek a remedy traditionally viewed as `equitable,' such as [an] injunction or restitution. . . . Although they often dance around the word, what petitioners in fact seek is nothing other than compensatory damages. . . . [which] are, of course, the classic form of legal relief.").
Kuhl v. Lincoln National Health Plan, 999 F.2d 298 (8th Cir. 1993) is quite analogous to the case confronted by this Court. In Kuhl, the plaintiffs alleged that their health plan improperly delayed precertification of Mr. Kuhl's heart surgery. See id. at 300. The defendant moved for summary judgment, arguing that ERISA preempted the claim. See id. at 300-301. The district court granted the motion. See id. at 301. On appeal, the Kuhls contended, inter alia, that the district court erred in dismissing the state law claims rather than recharacterizing them as ERISA claims. See id. at 304. The Kuhl court found, however, that the district court properly concluded that the claims could not be recharacterized, because ERISA did not allow recovery by the plaintiffs of money damages. See id. It explained, "[t]he Kuhls suggest that section 502(a)(3)(B)(i) . . . permits them to recover monetary damages. . . . We have previously held[, however,] that monetary damages are not available under" that provision. Id. at 304. Therefore, the court concluded, "[t]he district court properly held that Kuhls' claim for monetary damages was not cognizable under" § 502(a)(3)(B)(i). Id. at 305.
Applying the reasoning of Mertens and Kuhl, this Court holds that it cannot recharacterize Erwin's fraud claim under ERISA because Plaintiff's requested relief falls outside the range of ERISA. Thus, this Court hereby GRANTS Defendants' Motions for Judgment on the Pleadings on Plaintiff's common law fraud claim and DENIES the motions as to the Chapter 88, vicarious liability, negligence, and conspiracy claims. The Court reserves its rulings on the remaining claims within Plaintiff's Second Amended Complaint until the parties have submitted their briefs on the matter.
SO ORDERED.