Violet HOGAN, Plaintiff-Appellant, v. Jo Ellen JACOBSON; Kem Alan Lockhart, Defendants-Appellees.
No. 15-5572.
United States Court of Appeals, Sixth Circuit.
Argued: April 21, 2016. Decided and Filed: May 23, 2016.
823 F.3d 872
Before: MOORE, GIBBONS, and DAVIS,* Circuit Judges.
OPINION
KAREN NELSON MOORE, Circuit Judge.
In 2011, Violet Hogan sued the Life Insurance Company of North America for violating the Employee Retirement Income Security Act (ERISA),
I. BACKGROUND
Hogan was employed by SHPS, Inc., through which she was covered by a disability-insurance policy. See R. 43 (Am. Compl. ¶ 12) (Page ID # 697). During the course of her employment, she “became disabled and unable to continue working at SHPS, Inc.” Id. ¶ 13 (Page ID # 697). The disability-insurance policy made Hogan “eligible to seek and to receive short term disability benefits” and separately allowed her to receive long-term disability benefits if she was “disabled for 180 days.” Id. ¶ 14 (Page ID # 697).
Jo Ellen Jacobson and Kem Alan Lockhart worked for the insurance company that supplied the policy, and neither is licensed to practice medicine or psychology in Kentucky. See id. ¶¶ 16-18 (Page ID # 697). They “each provided opinions concerning Mrs. Hogan‘s diagnosis and treatment[,] including her physical and mental restrictions and limitations.” Id. ¶ 19 (Page ID # 697-98). Neither opinion was favorable to Hogan‘s application for benefits. See id. Hogan claims that Jacobson and Lockhart “individually and jointly knowingly provided the illegal medical and
On February 4, 2011, Hogan filed an ERISA lawsuit in federal court in Kentucky “alleging improper denial of [short-term disability] benefits and amended her complaint later that month to include a claim for improper denial of [long-term disability] benefits.” Hogan v. Life Ins. Co. of N. Am. (”Hogan I“), 521 Fed.Appx. 410, 414 (6th Cir. 2013). Hogan‘s short-term disability claim was rejected by the district court and, on appeal, by our court, which found that the denial of benefits was not arbitrary or capricious. See id. at 414-17. We also held that Hogan‘s claim for long-term disability benefits failed because “she did not first seek these benefits from [the Life Insurance Company of North America] and therefore she failed to exhaust administrative remedies with respect to this claim.” Id. at 417.
After the district court‘s decision in that case, but before our ruling, Hogan filed the present action in Kentucky state court. See R. 1-3 (Compl.) (Page ID # 15-18). She alleged that Jacobson and Lockhart were liable for negligence per se, under the theory that Kentucky‘s licensing statutes for medical professionals,
The district court denied Hogan‘s motion to remand the case, R. 23 (Sept. 26, 2013 Opinion) (Page ID # 605-12), and her motion to reconsider that decision, R. 38 (Mar. 12, 2014 Opinion) (Page ID # 681-87). In response, Hogan filed an Amended Complaint, which continued to plead her state-law claim “for the sole purpose of preserving her right to pursue said claim at such future time as the Court allows,” R. 43 (Am. Compl. at 4 n. 1) (Page ID # 698), and added an ERISA claim under
II. ANALYSIS
A. Complete Preemption
“[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction[] may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.”
“Ordinarily federal pre-emption is raised as a defense to the allegations in a plaintiff‘s complaint,” meaning “that a case may not be removed to federal court on the basis of ... the defense of pre-emption, even if the defense is anticipated in the plaintiff‘s complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392-93 (1987). But an exception to the well-pleaded complaint rule arises from the “misleadingly named doctrine” of complete preemption, Hughes v. United Air Lines, Inc., 634 F.3d 391, 393 (7th Cir.), cert. denied, 565 U.S. 913 (2011), which is more aptly described as a “jurisdictional” doctrine, Loffredo v. Daimler AG, 500 Fed.Appx. 491, 500 (6th Cir. 2012). “On occasion, the [Supreme] Court has concluded that the pre-emptive force of a statute is so ‘extraordinary’ that it ‘converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.‘” Caterpillar, 482 U.S. at 393 (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987)). “[T]he question whether a certain state action is preempted by federal law is one of congressional intent.” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137-38 (1990) (alteration in original) (quoting Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 208 (1985)).
Congress has expressed such an intent in ERISA, which “can preempt state-law claims in two ways: complete preemption under
A claim is within the scope of § 1132(a)(1)(B) for that purpose if two requirements are met: (1) the plaintiff complains about the denial of benefits to which he is entitled “only because of the terms of an ERISA-regulated employee benefit plan“; and (2) the plaintiff does not allege the violation of any “legal duty (state or federal) independent of ERISA or the plan terms.” Gardner, 715 F.3d at 613 (quoting Davila, 542 U.S. at 210). Hogan argues that neither requirement was met in this case, so her motion to remand was erroneously denied. We “review[] de novo the existence of subject matter jurisdiction as a question of law; factual determinations regarding jurisdictional issues are reviewed for clear error.” Grand Trunk W. R.R. Inc. v. Bhd. of Maint. of Way Emps. Div., 497 F.3d 568, 571 (6th Cir. 2007) (quoting Wright v. Gen. Motors Corp., 262 F.3d 610, 613 (6th Cir. 2001)).
1. Hogan Complains of the Denial of ERISA Benefits, Notwithstanding Her Artful Pleading to the Contrary.
Hogan asserts that the defendants “conceded” Davila‘s first prong when they
“To determine whether [a] cause[] of action fall[s] ‘within the scope’ of [§ 1132(a)(1)(B)], we must examine [the] complaint[], the statute on which [the plaintiff‘s] claims are based[,] ... and the various plan documents.” Davila, 542 U.S. at 211. A claim likely falls within the scope of § 1132 when “[t]he only action complained of” is a refusal to provide benefits under an ERISA plan and “the only relationship” between the plaintiff and defendant is based in the plan. See id. For that reason, claims purporting to challenge the actions of medical providers are nonetheless claims for ERISA benefits when the medical determinations challenged were made solely in the course of an ERISA-benefits determination and the damages alleged arise from the denial of benefits. See, e.g., Danca v. Private Health Care Sys., Inc., 185 F.3d 1, 6 (1st Cir. 1999) (allegation of negligent medical decisionmaking in connection with an insurance “precertification” determination was a preempted claim for ERISA benefits because “the conduct was indisputably part of the process used to assess a participant‘s claim for a benefit payment under the plan,” making the negligence claim “an alternative enforcement mechanism to ERISA‘s civil enforcement provisions” (internal quotation marks omitted)); Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1489 (7th Cir. 1996) (claim that a nurse breached a duty of care with respect to the plaintiff‘s medical treatment was a preempted claim for benefits because the defendant nurse was alleged to have “determined that said course of treatment was not medically necessary” during a benefits determination); Gibson v. Prudential Ins. Co. of Am., 915 F.2d 414, 417 (9th Cir. 1990) (claims of fraud against a claim-processing company and doctors were preempted because the “complaint alleges violations of duties created by the administration of the disability benefit plan” and “[t]here would be no relationship or cause of action ... without the plan“).
Hogan‘s negligence per se claim is merely an artful reassertion of her claim for ERISA benefits from Hogan I. Although Hogan ostensibly challenges the qualifications of Jacobson and Lockhart to review her medical file, her claim is necessarily premised on the existence of some relationship between herself and the defendants. It cannot be ignored that the entire relationship between the parties was limited to the defendants’ review of Hogan‘s medical file, which arose solely in connection with a disability-benefits determination. As a Kentucky federal district court found in rejecting this same theory raised by Hogan‘s counsel in another case, the plaintiff “essentially argues that [the defendants] negligently processed [her] claim in violation of
Nor are we persuaded by Hogan‘s assertions that the preceding analysis confuses express preemption under § 1144—which applies whenever the state-law basis for the claim “may now or hereafter relate to any employee benefit plan,”
2. The Legal Duty that Hogan Seeks to Enforce is Grounded in the ERISA Plan.
As for the second part of the Davila test—whether the plaintiff alleges the violation of an independent legal duty, 542 U.S. at 210—Hogan argues that her claim is predicated on the independent legal duty created by Kentucky‘s medical-licensing requirements. But she
“Whether a duty is ‘independent’ of an ERISA plan, for purposes of the Davila rule, does not depend merely on whether the duty nominally arises from a source other than the plan‘s terms.” Gardner, 715 F.3d at 613. The Supreme Court‘s decision in Davila illustrates why. There, the Supreme Court found that a state-law-based duty of ordinary care did not supply a legal duty independent of ERISA where it was used to claim that an employee-benefit plan had wrongly declined to cover particular medical services:
The [state law] does impose a duty on managed care entities to exercise ordinary care when making health care treatment decisions, and makes them liable for damages proximately caused by failures to abide by that duty. However, if a managed care entity correctly concluded that, under the terms of the relevant plan, a particular treatment was not covered, the managed care entity‘s denial of coverage would not be a proximate cause of any injuries arising from the denial. Rather, the failure of the plan itself to cover the requested treatment would be the proximate cause.
Davila, 542 U.S. at 212-13. This meant that the “potential liability under the [state law] ... derives entirely from the particular rights and obligations established by the benefit plans.” Id. at 213.
Similarly, the duty that Hogan alleges in this case ostensibly arises under state law, which mandates that those practicing medicine and psychology in Kentucky be licensed by the state. See
Hogan‘s case is therefore distinct from those she cited in which a truly independent state-law tort claim is brought between parties that happen also to have an ERISA-based relationship. See, e.g., Gardner, 715 F.3d at 614-15 (claim for tortious interference with contract against executives of a company and a company investor who allegedly induced the company to cancel a supplemental executive retirement plan in connection with the sale of the investor‘s ownership share); Darcangelo v. Verizon Commc‘ns, Inc., 292 F.3d 181, 186, 193-94 (4th Cir. 2002) (state-law tort claims against employer and disability-benefits administrator that the administrator had “solicited and disseminated [the plaintiff‘s] private medical information in order to assist [the employer] in its efforts to declare [the plaintiff] a ‘direct threat’ to her coworkers so that she could be fired“); Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 984 (9th Cir. 2001) (claim that disability-insurance agency was liable for tortious invasion of privacy in connection with actions of investigators tasked with uncovering information regarding plaintiff‘s alleged return to other work); Geller v. Cty. Line Auto Sales, Inc., 86 F.3d 18, 23 (2d Cir. 1996) (fraud claim by trustees of a multiemployer healthcare trust arising out of defendant‘s allegedly fraudulent representation that an individual was an employee of a member employer, thereby entitling that individual to medical coverage).
Accordingly, Hogan‘s state-law claim is merely an artfully pleaded claim for ERISA benefits, which ultimately arises out of the relationship created by an ERISA plan. The district court was
B. Failure to State a Claim
After finding that Hogan‘s state-law claims were completely preempted, the district court allowed her to amend her complaint to state any federal claims she wished. In response, Hogan sought to plead a claim under
“We review de novo the district court‘s ruling on a motion to dismiss a claim.” Jones v. City of Cincinnati, 521 F.3d 555, 559 (6th Cir. 2008), cert. denied, 555 U.S. 1099 (2009). “A claim survives such a motion if its ‘[f]actual allegations [are] enough to raise a right to relief above the specula-
1. Hogan‘s § 1132 Claim
Because Hogan‘s state-law claim is completely preempted, the district court could have directed Hogan to amend her complaint once more to plead only federal claims. Instead, it recast the state-law claim as one for benefits under
The district court was also correct to dismiss Hogan‘s § 1132 claim, for three independent reasons: First, the defendants are nurses employed by the company that administered Hogan‘s insurance benefits, but “the proper defendant in an ERISA action concerning benefits is the plan administrator.” Riverview Health Inst., 601 F.3d at 522. Second, Hogan seeks to recover only for injuries related to the denial of her request for long-term disability benefits, R. 43 (Am. Compl. ¶ 22) (Page ID # 698), yet we held in Hogan I that she had failed to exhaust her administrative remedies regarding long-term disability benefits, 521 Fed.Appx. at 417, and Hogan alleges nothing to suggest that things have changed. Third, Hogan‘s § 1132 claim is barred by res judicata, which prevents the relitigation of causes of action when four requirements are met:2 (1) a final decision on the merits by a court of competent jurisdiction; (2) a subsequent action between the same parties or their “privies“; (3) an issue in the subsequent action which was litigated or which should have been litigated in the prior action; and (4) an identity of the causes of action. Bragg v. Flint Bd. of Educ., 570 F.3d 775, 776 (6th Cir. 2009) (quoting Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 880 (6th Cir. 1997)). The first, third, and fourth factors are satisfied because the benefits claim in Hogan I is all but identical to the one brought here. As for the second element, the fact that Hogan I was brought against the Life Insurance Company of North America, while this case is brought against two medical reviewers employed by that company, is immaterial because res judicata applies when the later action involves a party that was in privity with a defendant in the prior action. See, e.g., Silva v. City of New Bedford, 660 F.3d 76, 80 (1st Cir. 2011) (“‘privity’ reaches employer-employee relationships), cert. denied, 132 S. Ct. 1808 (2012).
2. Hogan‘s § 1140 Claim
Hogan‘s Amended Complaint added an ERISA claim under
“[T]he emphasis of a [§ 1140] action is to prevent persons and entities from taking actions which might cut off or interfere with a participant‘s ability to collect present or future benefits or which punish a participant for exercising his or her rights under an employee benefit plan.” Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1134 (7th Cir. 1992). “A [§ 1140] plaintiff must show more than the mere denial of a claim to establish that an insurer has acted with the intent of interfering with a future right under
Hogan asserts that she properly stated a claim under § 1140 by recounting how Jacobson and Lockhart provided inaccurate opinions regarding her eligibility for disability benefits “for their own financial gain,” knowing that this “would interfere with Mrs. Hogan‘s right to pursue, attain and receive long term disability benefits” and “with the express purpose of denying Mrs. Hogan her long term disability benefits.” See R. 43 (Am. Compl. ¶¶ 16-22, 28-32) (Page ID # 697-99). Because a § 1140 action requires “more than the mere denial of a claim,” Custer, 12 F.3d at 422, it was incumbent upon Hogan to explain what Jacobson and Lockhart did to interfere with her ability to obtain benefits beyond their role in the review and denial of her claim. Instead, Hogan‘s allegations are mere recitations of the statutory language barring “interference” with obtaining benefits. These bare allegations that the defendants “sought to render a diagnosis and treatment conclusion that would prevent Mrs. Hogan from becoming eligible to receive her long term disability insurance benefits,” R. 43 (Am. Compl. ¶ 21) (Page ID # 698), that they intended to cause and did cause the denial of Hogan‘s claim for benefits, id. ¶ 22 (Page ID # 698), and that their “actions were designed to interfere with [Hogan] filing a claim, from becoming eligible, and ultimately from receiving the monthly income benefits,” id. ¶ 30 (Page ID # 699), do nothing to explain how Jacobson or Lockhart interfered beyond their involvement in the denial of her claim. Accordingly, Hogan failed to state a § 1140 claim.3
Over the course of this litigation, the defendants twice sought to obtain sanctions against Hogan and her counsel. See R. 10-2 (Mem. in Supp. of First Mot. for Sanctions at 16-26) (Page ID # 110-20); R. 57 (Second Mot. for Sanctions at 5-8) (Page ID # 823-26). The district court denied the first motion as premature, R. 38 (Mar. 12, 2014 Opinion at 6) (Page ID # 686), and stayed the second motion pending appeal, R. 67 (Dec. 3, 2015 Order) (Page ID # 857). Nonetheless, the defendants moved for sanctions on appeal, relying on Federal Rule of Appellate Procedure 38 and
These provisions provide overlapping standards. Federal Rule of Appellate Procedure 38 provides for sanctions “[i]f a court of appeals determines that an appeal is frivolous.” “Sanctions under Fed. R. App. P. 38 are ‘appropriate when an appeal is wholly without merit and when the appellant‘s arguments essentially had no reasonable expectation of altering the district court‘s judgment based on law or fact.‘” Scherer v. JP Morgan Chase & Co., 508 Fed.Appx. 429, 439 (6th Cir. 2012) (quoting B & H Med., L.L.C. v. ABP Admin., Inc., 526 F.3d 257, 270 (6th Cir. 2008)). Although a finding of bad faith is not required for imposition of Rule 38 sanctions, “we will usually impose Rule 38 ... sanctions only where there was some improper purpose, such as harassment or delay, behind the appeal.” Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1212 (6th Cir. 1997).
The defendants argue that these standards are met because of Hogan‘s careful attempts to ignore the existence of Hogan I as well as the precise contours of the relationship between herself and the defendants. The defendants target all of the issues in this case for sanctions: (1) Hogan‘s attempts to avoid complete preemption; (2) the manner in which Hogan pleaded her claim for ERISA benefits; and (3) the manner in which Hogan pleaded her § 1140 claim. The latter two points, however, relate to nothing more than garden-variety losing arguments. Hogan‘s pleading of her ERISA-benefits claim is not sanctionable due to her suing the wrong party or failing to explain how she solved her prior administrative-exhaustion problem because she was not trying to plead an ERISA claim at all; rather, her state-law claims were interpreted as such because she lost her complete-preemption argument. Hogan‘s § 1140 claim, while factually deficient, fails for reasons no different than a run-of-the-mill failure to state a claim, and the defendants cite no authority to support the proposition that sanctions are justified solely because a complaint contains conclusory allegations.
The defendants’ true focus is on whether Hogan‘s attempt to avoid pleading a claim that could be removed to federal court, along with her creative arguments against removal and failure to cite unfavorable district court precedent, are sanctionable. To be sure, Hogan‘s counsel has lost variations of this argument repeatedly in Kentucky federal district courts.4 But these
III. CONCLUSION
For the foregoing reasons, we AFFIRM the denial of Hogan‘s motion to remand and the grant of the defendants’ motion to dismiss and DENY the defendants’ motion for sanctions on appeal.