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Thomas v. Aetna, Inc.

United States District Court, D. New Jersey
Jun 8, 1999
CIVIL ACTION NO. 98-2552 (D.N.J. Jun. 8, 1999)

Summary

reaching same conclusion as to fraudulent inducement claim

Summary of this case from N.J. Brain & Spine Ctr. v. Conn. Gen. Life Ins. Co.

Opinion

CIVIL ACTION NO. 98-2552

June 8, 1999.

Jence L. Thomas, Esq., Bridgewater, New Jersey, Attorneys for Plaintiff.

Laurence B. Orloff, Esq., ORLOFF, LOWENBACH, STIFELMAN SIEGEL, Roseland, New Jersey, Attorney for Defendants.



OPINION


This matter is before the court on certain defendants' motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). Alternatively, the defendants move for summary judgment as to Counts One and Two of the Complaint. In short, the defendants contend that Counts One and Two, which allege claims based upon common law fraud and the New Jersey Consumer Fraud Act respectively, are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), codified at 29 U.S.C. § 1001 et seq. With respect to Count Four, which alleges a claim based upon the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the defendants argue that the plaintiff has failed to state a claim upon which relief may be granted. I. PARTIES AND BASIS OF JURISDICTION

Count Three asserts a medical malpractice claim against the following defendants: Debra Jones, M.D., Radiology Associates of Delaware, Inc., Fred H. Schlesinger, M.D., Richard T. Magrini, M.D., Delaware Valley OB/GYN and Infertility Group, P.C., and Scott E. Eder, M.D. These defendants have not joined in the present motion. For the sake of brevity, the moving defendants will simply be referred to as the "defendants".

The present action was instituted on June 1, 1998. The plaintiff, a Pennsylvania resident, has named various defendants, including Aetna Inc. ("Aetna"), formerly known as U.S. Healthcare, Inc. ("USH") and the parent company of Aetna U.S. Healthcare, Inc. ("AUSHC"). The individual defendants joining in this motion are various current and former officers, directors, and employees of one or more of the above-named entities. They include Leonard Abramson, a member of the Board of Directors; Ronald E. Compton, a former director and chairman of Aetna; Richard L. Huber, a director, chief executive officer, and president of Aetna; Arnold W. Cohen, M.D., Principal Medical Director at AUSHC; Liz Holbrook, Team Coordinator, Member Services at AUSHC; Thomas J. Calvocoressi, vice president and general counsel of Aetna; Thomas J. McInerny, executive Vice President of Aetna; Michael J. Cardillo, president of AUSHC; and Joseph Sebastianelli, for president of Aetna.

Not taking part in this motion are the following defendants: Debra Jones, M.D., Radiology Associates of Delaware, Inc., Fred H. Schlesinger, M.D., Richard T. Magrini, M.D., Delaware Valley OB/GYN and Infertility Group, P.C., and Scott E. Eder, M.D.

Subject matter jurisdiction over this matter is predicated on federal question jurisdiction pursuant to 28 U.S.C. § 1331, presumably on the strength of the RICO claim embodied in Count Four.

II. STANDARD OF REVIEW

The defendants' motion to dismiss was made pursuant to Rule 12(b)(6) for failure to state a claim. With respect to Counts One and Two of the complaint, however, the defendants have moved alternatively under Rule 56 for summary judgment.

The standard of review on a motion to dismiss pursuant to Rule 12(b)(6) is well settled. A "Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted must be denied `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" In re Donald J. Trump Casino Sec. Litig., 793 F. Supp. 543, 547 (D.N.J. 1992) (quotingScheuer v. Rhodes, 416 U.S. 232, 236 (1974)), aff'd, 7 F.3d 357 (3d Cir. 1993); see also Conley v. Gibson, 355 U.S. 41, 45 (1957); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997). The focus of the court's analysis on a Rule 12(b)(6) motion is not whether the plaintiff will prevail on the merits, but whether the plaintiff "is entitled to offer evidence to support the claims." Zucker v. Quasha, 891 F. Supp. 1010, 1014 (D.N.J. 1995) (quoting Scheuer, 416 U.S. at 232), aff'd, 82 F.3d 408 (3d Cir. 1996); see also Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993) ("A 12(b)(6) motion tests the sufficiency of the allegations contained in the complaint.").

When reviewing the efficacy of a cause of action under this rule, the court must accept as true all well-pleaded allegations of the complaint and construe them in a light most favorable to the plaintiff. See Bensalem Township v. International Surplus Lines Ins. Co., 38 F.3d 1303, 1308 (3d Cir. 1994); Rogin v. Bensalem Township, 616 F.2d 680, 685 (3d Cir. 1980). However, "[i]t is not . . . proper to assume that the [plaintiff] can prove any facts that it has not alleged." Associated Gen. Contractors of Calif., Inc., v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, when reviewing the allegations contained in the complaint, "the court does not consider conclusory recitations of law." Commonwealth of Pa. v. PepsiCo, Inc., 836 F.2d 173, 179 (3d Cir. 1988).

In ruling upon a motion to dismiss, the court must restrict its consideration to only those matters alleged in the complaint, exhibits attached to the complaint, and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). If matters outside the pleadings are considered, the court must convert the motion to one for summary judgment under Rule 56(c) and provide the parties with notice of this conversion. See Rule 12(b); see also Renz v. Shreiber, 832 F. Supp. 766, 770 (D.N.J. 1993). The decision to convert a motion to dismiss into a summary judgment motion is entrusted to the district court's discretion. See Kulwicki v. Dawson, 969 F.2d 1454, 1463 (3d Cir. 1992) (citing 5A Wright Miller,Federal Practice Procedure, § 1366 at 491 (1990)).

In this case, the defendants submitted the declaration of Gerald Lawrence, an attorney with AUSHC, in support of their motion to dismiss. After reviewing all of the submissions both in support of and in opposition to the defendants' Rule 12(b)(6) motion, as well as the pleading filed in this case, this court determined that a conversion of the Rule 12(b)(6) motion to one for summary judgment may be appropriate in this case. Accordingly, by letter order, dated March 19, 1999, this court provided the parties with an opportunity to supplement the record and to present any material relevant to the issue of ERISA preemption. Having comported with the requirements of Rule 12(b), this court will convert the defendants' motion to dismiss Counts One and Two of the complaint based on ERISA preemption to one for summary judgment.

Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment will be granted

if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law.
See also Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989). In other words, "summary judgment may be granted if the movant shows that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party." Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir. 1988). All facts and inferences are construed in the light most favorable to the non-moving party. See Peters v. Delaware River Port Auth. of Pa. and N.J., 16 F.3d 1346, 1349 (3d Cir. 1994).

The substantive law will identify which facts are "material." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Therefore, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. An issue is "genuine" if a reasonable jury could possibly hold in the nonmovant's favor with regard to that issue. Id.

The party seeking summary judgment always bears the initial burden of production, i.e., of making a prima facie showing that it is entitled to summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). This may be done either by demonstrating there is no genuine issue of fact and that the moving party must prevail as a matter of law, or by demonstrating that the nonmoving party has not shown facts relating to an essential element of a claim for which it bears the burden of persuasion at trial. Id. at 322-23. Once either showing is made, the burden shifts to the nonmoving party who must demonstrate facts supporting each element for which it bears the burden as well as establish the existence of genuine issues of material fact. Id. at 324.

However, at the summary judgment stage, a court may not weigh the evidence or make credibility determinations; these tasks are left to the fact-finder. See Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1230 (3d Cir. 1993). Therefore, to raise a genuine issue of material fact, "`the [summary judgment] opponent need not match, item for item, each piece of evidence proffered by the movant,' but simply must exceed the `mere scintilla' standard." Id. (quoting Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1364 (3d Cir. 1992)); see also Anderson, 477 U.S. at 252 ("The mere existence of a scintilla of evidence in support of the [nonmovant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant]."). That is to say, if a moving party satisfies its initial burden of proving a prima facie case for summary judgment, the opposing party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, "[t]here must be sufficient evidence for a jury to return a verdict in favor of the non-moving party; if the evidence is merely colorable or not significantly probative, summary judgment should be granted." Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994).

III. BACKGROUND

The plaintiff was enrolled in the Group Health Care Plan (the "Plan") provided by USH as of May 1, 1994. The Plan was established and maintained by her then employer for the purpose of providing health care financing benefits to its employees. The plaintiff remained a member/participant of the Plan until approximately September 1, 1996, when she exercised continuation rights under the Plan, and thereafter continued as an individual member/participant of USH, and subsequently, AUSHC.

It appears that the genesis of this action emanates from what plaintiff alleges to have been a misdiagnosis of breast cancer. Sometime in 1994, the plaintiff had a mammogram. The plaintiff alleges that both USH and Dr. Scott Eder, another defendant in this case, informed her that the mammogram was "normal" and showed no "indication of malignancy." The plaintiff alleges that this diagnosis was incorrect, and in fact, she was suffering from breast cancer since 1994. It was only in 1996, she further alleges, that she was ultimately informed of the true nature of her condition.

From this nucleus of facts, the plaintiff has filed a four count complaint against various defendants. Count One of her complaint contains a host of allegations that the defendants engaged in a "pattern of intentional fraud and misrepresentations . . . for a number of years. . . ." Specifically, the plaintiff alleges that the defendants: (1) fraudulently misrepresented and intentionally concealed her medical records for approximately two years; (2) breached her contract rights by intentionally denying her preventative care, early detection, and participation in decisions regarding her health care; (3) fraudulently induced her to enter into a contract based upon the advertising put out by USH and AUSHC; (4) defrauded her "through the wire services by taking her premium payments while intentionally failing to provide the promised health care coverage"; (5) defrauded her "through the mail services in the form of their advertising, the forwarding to Plaintiff and receipt from Plaintiff of her applications and personal information, attempting to refuse delivery of Plaintiff's 1997 2nd quarter premium payment by Express mail and then destroying the premium check in an attempt to cancel Plaintiff's claims which are purported to be covered by new limited coverage"; (6) tortiously interfering with the doctor/patient relationship "by intentionally concealing from both [the primary care physician] and Plaintiff the true information contained in Plaintiff's 1994 mammography report"; (7) engaged in false advertising; (8) engaged "in the unauthorized practice of medicine by making the decision to conceal Plaintiff's condition from her and her [primary care physician] and ensuring the Physician Defendants' actions in concert with that decision through their policy of defining `inappropriate utilization' of services, `reviewing data,' and `helping' network health care providers"; (9) harassed and intentionally inflicted emotional distress upon her "at a time when she requires as stress-free an environment as possible to promote her recovery, through denying her claims, refusing her the health care coverage she was originally approved for, and sending her information designed to reassure of their interest in preventive [ sic] care and early detection, such as her recent receipt of her `it's time to have your mammogram' package, not even recognizing that Plaintiff is already one of their breast cancer patients, even though they purposely kept that information from her for nearly two years; (10) retaliated against her "by concealing or destruction [ sic] of medical records, the destruction of premium checks, the continuing harassment, and the intentional infliction of emotional distress; (11) denied her "the individual coverage for which she was originally approved on June 28, 1996, after her diagnosis on July 15, 1996"; and (12) denied "reimbursement of her cancer-related drug bills as promised, both pharmacy and physician, even though Plaintiff is being successfully and inexpensively treated where USH requested."

Count Two of the complaint asserts a cause of action based upon the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-1 et seq. The facts underlying this cause of action are mainly those pled in Count One of the Complaint. The primary allegation underpinning Count Two is that the defendants "made affirmative and intentional misrepresentations of material facts to Plaintiff and her [primary care physician] and, moreover, knowingly and intentionally omitted to relate those material facts to Plaintiff and her [primary care physician] for almost two years, despite their repeated requests for a copy of" the results of the 1994 mammography.

Count Four of the complaint alleges a RICO cause of action, 18 U.S.C. § 1964. Specifically, the plaintiff alleges that "[a]s a result of the pattern of conduct of fraud, harassment, and retaliation perpetrated by the Defendants against the Plaintiff, Defendants . . . have engaged in actions constituting racketeering by committing fraud, harassment, and retaliation in concert against the Plaintiff victim." The plaintiff further alleges that the defendants utilized interstate mails and wires to execute and effectuate the various alleged fraudulent schemes. Accordingly, the plaintiff alleges that in furtherance of their racketeering scheme, the defendants engaged in mail fraud, in violation of 18 U.S.C. § 1341, wire fraud, in violation of 18 U.S.C. § 1343, and unlawful retaliation against a victim, in violation of 18 U.S.C. § 1513. The plaintiff therefore demands actual and treble damages pursuant to the RICO statute.

IV. DISCUSSION

A. Preemption

ERISA was enacted, inter alia, to comprehensively and exclusively regulate employee welfare benefit plans. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987). The statute was designed to protect the interests of employees and their beneficiaries in employee benefit plans and promote administrative efficiency through exclusive federal regulation of such plans. See Keystone Chapter, Assoc. Builders and Contractors, Inc. v. Foley, 37 F.3d 945, 954 (3d Cir. 1994); Bellemead Dev. Corp. v. New Jersey State Council of Carpenters Benefit Funds, 11 F. Supp.2d 500, 507 (D.N.J. 1998). ERISA, therefore, comprehensively regulates employee welfare benefit plans that, "through the purchase of insurance or otherwise," provide medical, surgical, or hospital care, or benefits in the event of sickness, accident, disability, or death. 29 U.S.C. § 1002(1).

By its own terms, the purpose of ERISA is to

protect . . . 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. § 1001(b).

To maintain the integrity of its comprehensive legislative scheme, Congress enacted a preemption provision which directs that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). In this context, "State laws" include statutes, regulations, rules, court decisions, and any "other State action having the effect of law." 29 U.S.C. § 1144(c)(1); see also Gould v. Great-West Life Annuity Ins. Co., 959 F. Supp. 214, 218 (D.N.J. 1997) ("Preemption applies both to state statutory and common law claims.").

In applying the ERISA preemption clause to state law causes of action, the Third Circuit, along with other courts, has developed a two-pronged inquiry: (1) whether the defendant had an ERISA benefit plan; and (2) whether the state law claims "relate to" that plan. See Ferguson Elec. Co., Inc. v. Foley, 115 F.3d 237, 240 (3d Cir. 1997) (citing California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324 (1997)); Alston v. Atlantic Elec. Co., 962 F. Supp. 616, 622 (D.N.J. 1997); Pane v. RCA Corp., 667 F. Supp. 168, 170 (D.N.J. 1987), aff'd, 868 F.2d 631 (3d Cir. 1989).

There does not appear to be a dispute that the plaintiff was a participant in an employee welfare benefit plan. An "employee welfare benefit plan" is defined, in relevant part, as

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. . . .
29 U.S.C. § 1002(1). There is no dispute that the plaintiff's former employer had maintained an employee welfare benefit plan within the meaning of ERISA, and since 1994, the plaintiff has been a member of and participant in that plan. There also does not appear to be a dispute that the Plan was maintained for the purpose of providing medical care benefits. Accordingly, the first prong of the ERISA preemption test is satisfied.

The central issue in this case is whether the plaintiff's claims "relate to" an ERISA plan within the ambit of the preemption clause. As explained by the Court in Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138 (1990),

[t]he key to [§ 1144(a)] is found in the words "relate to." Congress used those words in their broad sense, rejecting more limited preemption language that would have made the clause only applicable to state laws relating to specific subjects covered by ERISA.

The Supreme Court has instructed that ERISA preempts state law in a "deliberately expansive" manner, and the phrase "relate to" should therefore be given a broad commonsensical meaning. See Dedeaux, 481 U.S. at 45-46, 47; see also FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990) ("The pre-emption clause is conspicuous for its breadth."); Pane v. RCA Corp., 868 F.2d 631, 635 (3d Cir. 1989) ("The term `relate to' has been construed broadly."). The purpose of the broad preemption clause is "to ensure plans and plan sponsors that they would be subject to a uniform body of benefit law, minimizing the administrative and financial burden of complying with conflicting requirements of the various states."Jorgensen v. Prudential Ins. Co. of Am., 852 F. Supp. 255, 260-61 (D.N.J. 1994) (citing McClendon, 498 U.S. at 142).

The Supreme Court has held that a "state law `relate[s] to' a benefit plan `in the normal sense of the phrase, if it has a connection with or reference to such a plan.'" Dedeaux, 481 U.S. at 47 (quoting Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985)); see also Keystone Chapter, 37 F.3d at 954-55. Put another way, a state law "relate[s] to" an ERISA plan "if it is specifically designed to affect employee benefits plans, if it singles out such plans for special treatment, or if the rights or restrictions it creates are predicated on the existence of such a plan." Ragan v. Tri-County Excavating, Inc, 62 F.3d 501, 510-11 (3d Cir. 1995) (quoting United Wire v. Morristown Mem'l Hosp., 995 F.2d 1179, 1192 (3d Cir. 1993)).

Despite the broad scope of the preemption clause, ERISA does not preempt all state law claims. The Supreme Court has recently clarified that the phrase "relate to" has limits, and that courts should "look to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive ." DeBuono v. NYSA-ILA Med. and Clinical Servs. Fund, 520 U.S. 806, 813-14 (1997). In New York State Conference of Blue Cross Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 655-57 (1995), the Court noted that although "[t]he governing text . . . is clearly expansive," the phrase "relate to" should not be read literally. The Court reasoned that to do so would provide no stopping point for ERISA preemption. Id.; see also Joyce v. RJR Nabisco Holding Corp., 126 F.3d 166, 173 (3d Cir. 1997) (citing Travelers). As the Supreme Court has recognized, "[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law relates to the plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21 (1983). Consequently, Congress did not intend to preempt state laws traditionally subject to local regulation, see Dillingham Constr., 519 U.S. at 334, or "generally applicable statute[s] that make no reference to, or indeed functions irrespective of, the existence of an ERISA plan," McClendon, 498 U.S. at 139. However, ERISA still preempts a state law when a "plan is a critical element of a state law cause of action." DeBuono, 520 U.S. at 815.

The allegations found in Counts One and Two of the complaint are grounded in fraud. While these counts contain a bevy of allegations, boiled to their essence, they accuse the defendants of having fraudulently induced her into entering into a contract for health care benefits; of making fraudulent misrepresentations concerning her medical condition, as well as actively concealing that information from her and her primary care physician, so as to deprive her of medical care; of breaching their contractual obligations by denying her preventative care, early detection options, and the ability to participate in decisions regarding her health care; and of fraudulently denying her benefits for the purpose of increasing their profits. The plaintiff's damages therefore resulted from the defendants' fraudulent misrepresentations to her, and concealment from her, of medical information, which action was undertaken with the intent to deprive the plaintiff of care in order to render the defendants' ERISA-governed plan more profitable.

In light of the relevant authorities, this court concludes that the plaintiff's claims embodied in Counts One and Two of the complaint are preempted by ERISA.

First, plaintiff's fraudulent inducement claims are clearly predicated on the existence of an ERISA plan. The Eleventh Circuit's decision inHall v. Blue Cross/Blue Shield of Ala., 134 F.3d 1063 (11th Cir. 1998), is instructive. When plaintiff Denise Hall learned that she would need to have an ovarian mass surgically removed, she consulted appellee Blue Cross Blue Shield of Alabama ("Blue Cross"), the insurer of her employer-provided health benefits plan. Blue Cross informed Hall that it would deny any insurance claim arising out of the surgery. After Hall proceeded with the surgery and incurred over $10,000 in medical expenses, she filed suit, claiming that agents of Blue Cross fraudulently induced her to enroll in its plan based on material misrepresentations about the scope of insurance coverage for preexisting conditions. The Eleventh Circuit affirmed the district court's dismissal of the plaintiff's fraudulent inducement claim. The court reasoned that "[b]ecause the terms of Blue Cross's ERISA-governed policy are critical to the resolution of Hall's fraudulent inducement claims, her cause of action is sufficiently related to an employee benefits plan to fall within ERISA's preemptive scope." Id. at 1065; see also Franklin v. QHG of Gadsden, Inc., 127 F.3d 1024, 1029 (11th Cir. 1997); Stoudemire v. Provident Life and Accident Ins. Co., 24 F. Supp.2d 1252, 1258-59 (M.D.Ala. 1998); Weatherly v. Illinois Bell Tel., 856 F. Supp. 1301, 1304-05 (N.D.Ill. 1994)

In Crumley v. Stonhard, Inc., 920 F. Supp. 589 (D.N.J.), aff'd, 106 F.3d 384 (3d Cir. 1996), the plaintiff alleged, inter alia, that the defendant had fraudulently induced him into entering into an agreement under which the plaintiff released any claims he may have had under an employee benefit plan. He alleged that the defendant misrepresented to him that the company was not for sale, thereby diminishing the value of the plan. The court held that the misrepresentation claims were preempted:

It is apparent that the allegations in this Court are predicated upon the existence of the Plan and the benefits to which Plaintiff alleges he is entitled. Moreover, Plaintiff's claim for intentional misrepresentation requires the court to examine the terms of the Plan. When "the court's inquiry must be directed to the plan, [a] judicially created cause of action `relate[s] to' an ERISA plan."
Id. at 594-95 (quoting McClendon, 498 U.S. at 140); see also Bernatowicz v. Colgate Palmolive Co., 785 F. Supp. 488, 493 (D.N.J.) (holding that since plaintiffs' negligent misrepresentation claim was premised on existence of pension plan and claim arose solely from alleged misrepresentation over plan rules, it was preempted), aff'd, 981 F.2d 1246 (3d Cir. 1992).

Similarly, in Alston v. Atlantic Electric Co., 962 F. Supp. 616 (D.N.J. 1997), the plaintiffs argued, inter alia, that the defendant provided false information to induce them into early retirement. They maintained that they relied on this information to their ultimate detriment. The court dismissed the claim, reasoning that it constituted an alternative theory to hold the defendant liable for its administration of benefits that are governed by ERISA. Id. at 624.

In the case at bar, this court must at some point resort to the written policy to assess the truth of any representations made to the plaintiff to determine whether she was fraudulently induced into entering into the Plan. Because the terms of the Plan are critical to the resolution of the fraudulent inducement claim, the plaintiff's cause of action is sufficiently "related to" an ERISA plan to fall within the purview of ERISA's preemption clause.

Insofar as the plaintiff has asserted a breach of contract cause of action, it is undoubtedly preempted. Such a claim is premised upon the type or extent of benefits the defendants allegedly promised under the terms of an ERISA-governed plan, and as such, falls within the preemptive scope of § 1144(a). See Pane, 868 F.2d at 635; Alston, 962 F. Supp. at 624; Schwartz v. FHP Int'l Corp., 947 F. Supp. 1354, 1359 (D.Ariz. 1996); Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 184-85 (E.D.Pa. 1994); Suggs v. Pan Am. Life Ins. Co., 847 F. Supp. 1324 (S.D.Miss. 1994).

With respect to the plaintiff's claim that the defendants fraudulently misrepresented to her, and concealed from her, information concerning her medical condition, this court finds persuasive the holding of Schwartz v. FHP International Corp., 947 F. Supp. 1354 (D.Ariz. 1996), a case which presented facts closely analogous to those herein. In Schwartz, the plaintiff alleged that her HMO physicians had failed to diagnose her breast cancer for nearly three years, despite her suspicions, which were related to them, that she had in fact developed the disease. The plaintiff sued the HMO, alleging, inter alia, breach of contract, fraud, and intentional misrepresentation. The latter claim was grounded on the allegation that the HMO had fraudulently misrepresented the nature of the plaintiff's medical condition and the recommended medical treatment. Id. at 1357. The court held that such a claim "clearly `relate[s] to' [the] administration of plan benefits, and as such, are preempted by the broad preemption provisions of" § 1144(a). Id. at 1359. As did the court inSchwartz, this court finds that the plaintiff's claim of fraudulent misrepresentation is preempted by § 1144(a).

The plaintiff has also alleged that the defendants fraudulently denied her benefits for the purpose of increasing their profits. In McClendon, the Supreme Court addressed a similar issue. In that case, the plaintiff alleged that his employer terminated him to avoid making contributions to his pension fund. The Court held that the claim was preempted.McClendon, 498 U.S. at 138. In order for the plaintiff to prevail, the Court reasoned, he would have to prove that the employer's motive was to avoid further contributions to its pension plan. To do so, however, the plaintiff would first have to establish the existence of the pension plan and the employer's intent to defeat its purpose. Id. at 140. The Court stated:

Here, the existence of a pension plan is a critical factor in establishing liability under the State's wrongful discharge law. As a result, this cause of action relates not merely to pension benefits, but to the essence of the pension plan itself. . . . [I]n order to prevail, a plaintiff must plead, and the court must find, that an ERISA plan exists and the employer had a pension-defeating motive in terminating the employment. Because the court's inquiry must be directed to the plan, this judicially created cause of action "relate[s] to" an ERISA plan.
Id. at 139-40.

Similarly, in Schwartz, the plaintiff alleged, inter alia, that the defendants intentionally inflicted emotional distress by advancing their own monetary interests over the interests of the plaintiff's health. 947 F. Supp. at 1357. The court held that such a claim was preempted because it "related to" the administration of the ERISA-governed plan. Id. at 1359.

In Kearney, the district court for the Eastern District of Pennsylvania found that a "claim that participating primary care physicians were restricted or discouraged for economic reasons from referring beneficiaries to specialists or hospitals or from using the most state of the art diagnostic tests merely ascribes to a defendant a motive for failing to provide certain benefits and is preempted." 859 F. Supp. at 187.

As in McClendon, Schwartz, and Kearney, the plaintiff's claim here is premised on the existence of an ERISA-governed plan. The plaintiff alleges that the defendants denied her benefits to increase their own profits. To make out this claim, however, the plaintiff must first prove the existence of a plan and that she was improperly denied benefits thereunder. Because the existence of an ERISA-governed plan is critical to this aspect of the plaintiff's cause of action, it is preempted under ERISA.

Count Two asserts a cause of action based upon New Jersey Consumer Fraud Act, which provides as follows:

Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefor in any court of competent jurisdiction.

N.J.S.A. § 56:8-19. An "unlawful practice" under the act is defined, in relevant part, as "[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise. . . ." N.J.S.A. § 56:8-2 (emphasis supplied).

In this case, the plaintiff alleges in her complaint that the "merchandise" here is the "provision of services" under the Plan.Complaint at ¶¶ 33-34. Because the trigger for liability under the state consumer fraud act is the provision of services under the Plan, the plaintiff must first establish the existence of the Plan. As discussed above, when the existence of an ERISA-governed plan is critical to the plaintiff's cause of action, it is preempted by § 1144(a). See, e.g.,Tarr v. State Mut. Life Assurance Co. of Am., 913 F. Supp. 40, 43 (D.Mass. 1996) (finding claim under state unfair trade practices "because plaintiff must plead, and the Court must find, that the ERISA plans exist, plaintiff's state law claims are preempted"); National Alcoholism Programs/Cooper City, Fla., Inc. v. Palm Springs Hosp. Employee Benefit Plan, 825 F. Supp. 299, 303 (S.D.Fla. 1993) (finding claim under Florida Unfair Trade Practices Act preempted since there would be no cause of action "if the ERISA plan did not exist").

Accordingly, the claims encompassed within Counts One and Two of the complaint are preempted by § 1144(a) of ERISA, and therefore will be dismissed.

B. RICO

Count Four of the complaint alleges that "[a]s a result of the pattern of conduct of fraud, harassment, and retaliation perpetrated by the Defendants against the Plaintiff, Defendants . . . have engaged in actions constituting racketeering by committing fraud, harassment, and retaliation in concert against the Plaintiff victim," in violation of the federal RICO statute. The plaintiff further alleges that the defendants utilized interstate mails and wires to execute the various fraudulent schemes. Accordingly, the plaintiff alleges that in furtherance of their racketeering scheme, the defendants engaged in mail fraud, in violation of 18 U.S.C. § 1341, wire fraud, in violation of 18 U.S.C. § 1343, and unlawful retaliation against a victim, in violation of 18 U.S.C. § 1513. The plaintiff therefore demands actual and treble damages pursuant to the RICO statute. The defendants have moved to dismiss the RICO claim pursuant to Rule 12(b)(6).

Section 1964(c) of title18 of the United States Code, provides in relevant part as follows:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit. . . .

To recover under § 1964(c), a plaintiff must plead, among other things, (1) a § 1962 violation and (2) an injury to business or property by reason of such violation. See Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1187 (3d Cir. 1993) (citing Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1164 (3d Cir. 1989)). The plaintiff's complaint herein fails on both counts.

To make out a claim under § 1964(c), plaintiff must allege at least one of the following pursuant to § 1962: (1) that the defendants used money derived from a pattern of racketeering activity or through collection of an unlawful debt to use or invest in an enterprise, 18 U.S.C. § 1962(a); (2) that the defendants acquired or maintained any interest in or control of any enterprise through a pattern of racketeering activity or collection of an unlawful debt, 18 U.S.C. § 1962(b); (3) that the defendants conducted or participated in an enterprise through a pattern of racketeering or collection of an unlawful debt, 18 U.S.C. § 1962(c); or (4) that the defendants conspired to violate §§ 1962(a), (b), or (c), 18 U.S.C. § 1962(d).

In this case, the plaintiff has not alleged a violation of any subsection of § 1962. As one court has stated, "[p]leading a specific subsection of § 1962 is important because the enterprise requirements are different depending upon which subsection is allegedly violated."B.V. Optische Industrie De Oude Delft v. Hologic, Inc., 909 F. Supp. 162, 168 n. 2 (S.D.N.Y. 1995) (citing Reynolds v. East Dyer Dev. Co., 882 F.2d 1249, 1251 (7th Cir. 1989)). Accordingly, "[f]ailure to plead a specific subsection of § 1962 may alone constitute grounds to dismiss a RICO complaint, because it fails to inform defendants of the unlawful conduct in which they allegedly engaged." Atlantic Gypsum Co. v. Lloyds Int'l Corp., 753 F. Supp. 505, 511 (S.D.N.Y. 1990); see also Ambraziunas v. Bank of Boulder, 846 F. Supp. 1459, 1463 (D.Colo. 1994); Anvan Realty Management Co. v. Marks, 680 F. Supp. 1245, 1247 (N.D.Ill. 1988). The plaintiff's failure to plead a violation of a specific subsection of § 1962 places the defendants in a position of speculating as to the specific unlawful conduct at issue in this case. They are therefore unable to determine which of the enterprise requirements are applicable. The plaintiff's failure in this regard requires dismissal of her RICO claim.

Even if this court were to ignore the fact that the plaintiff has failed to plead a § 1962 violation, the RICO claim must nevertheless be dismissed since the plaintiff has failed to plead or otherwise establish that she was harmed in her "business or property."

By its very terms, RICO remedies are limited to injuries to business or property. See 18 U.S.C. § 1964(c). In accord with this language, the Third Circuit has held that personal injuries are not compensable under the statute. See Genty v. Resolution Trust Corp., 937 F.2d 899, 918-19 (3d Cir. 1991). The Genty court explained that Congress did not contemplate remedies for purely personal injuries when RICO was enacted:

Congress' apparent unwillingness to allow recovery for personal injuries under RICO appears to be consistent with enacting RICO and its specific intention to thwart the organized criminal invasion and acquisition of legitimate business enterprises and property. Ample law already existed to provide recovery for wrongfully inflicted personal injuries. The unavailability of a civil RICO treble damages action for personal injuries in no way restricts the plaintiff's right to bring a pendent state wrongful death or personal injury action along with a RICO action for damages to business and property. We discern no injustice in limiting a RICO plaintiff's recovery for his personal injuries to ordinary non-RICO legal measures.
We thus refuse to enlarge Congress' specific limitation of RICO recovery to business and property. The significance of section 1964(c)'s plain language is clear: RICO plaintiffs may recover damages for harm to business and property only, not to physical and emotional injuries due to harmful exposure to toxic waste.
Id.

Similarly, in Cuzzupe v. Paparone Realty Co., 596 F. Supp. 988, 991 (D.N.J. 1984), the court recognized that

the proper reading of § 1964(c) is that the plaintiffs may recover only for business or property damages that are sustained. This is not only a fair reading of the language but also recognizes that RICO was designed to eliminate pernicious commercial practices.

Courts from outside the Third Circuit have also concluded that a plaintiff cannot recover for personal injuries under RICO. See, e.g.,Oscar v. University Students Co-op Ass'n, 965 F.2d 783, 785-86 (9th Cir. 1992) (collecting cases).

In Allman v. Philip Morris, Inc., 865 F. Supp. 665 (S.D.Cal. 1994), the plaintiffs claimed that they were not seeking damages for their addiction or pain or suffering, or fear of cancer — clearly personal injuries — under RICO. Instead, they were claiming "damages for the out-of-pocket expenses they incurred in treating their addictions, specifically the cost of the Nicotine Patch and related medical expenses."Id. at 668. The court rejected this claim, reasoning that

although plaintiffs characterize the injury as pecuniary and thus an injury to their property, the Court is unable to ignore that the core injury alleged in the complaint is addiction to nicotine. Plaintiffs have incurred the costs of the Nicotine Patch and other medical expenses as a direct result of their addictions. Such pecuniary consequences of personal injuries are not recoverable under RICO.
Id. Accordingly, the court dismissed the plaintiffs' RICO claim. Id. at 669; see also City and County of San Francisco v. Philip Morris, Inc., 957 F. Supp. 1130, 1138-39 (N.D.Cal. 1997) (dismissing plaintiff counties' RICO claim against cigarette manufacturers where plaintiffs had failed to allege injury to business or property); Ehrich v. B.A.T. Indus. P.L.C., 964 F. Supp. 164, 167 (D.N.J. 1997) (dismissing RICO claim, reasoning that "plaintiffs' core injuries are medical in nature ( i.e., nicotine addiction, carcinoma and lung tumors, and lung cancer), not proprietary, and any incidental financial consequences do not give rise to a claim under 18 U.S.C. § 1964(c)").

Based upon this court's review of the language of § 1964(c), the plaintiff's RICO claim in this case must be dismissed in light of the foregoing authorities. Plaintiff has failed to plead that the defendants' conduct caused injury to her business or property. Moreover, the core injury in this case is the personal injury that the plaintiff suffered from breast cancer, coupled possibly with the collateral consequences of that personal injury. The plaintiff cannot recover for these personal injuries through a civil action under RICO.


Summaries of

Thomas v. Aetna, Inc.

United States District Court, D. New Jersey
Jun 8, 1999
CIVIL ACTION NO. 98-2552 (D.N.J. Jun. 8, 1999)

reaching same conclusion as to fraudulent inducement claim

Summary of this case from N.J. Brain & Spine Ctr. v. Conn. Gen. Life Ins. Co.
Case details for

Thomas v. Aetna, Inc.

Case Details

Full title:JENCE LIEUGENYER THOMAS, Plaintiff, v. AETNA, INC., et al . Defendants

Court:United States District Court, D. New Jersey

Date published: Jun 8, 1999

Citations

CIVIL ACTION NO. 98-2552 (D.N.J. Jun. 8, 1999)

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